Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

GREATER LONDON COUNCIL (GENERAL POWERS) BILL (By Order)

LONDON TRANSPORT BILL (By Order)

Order for Second Reading read.

To be read a Second time upon Thursday 2 April.

BRITISH TRANSPORT DOCKS BILL (By Order)

Order for Second Reading read.

To be read a Second time upon Thursday 26 March.

LLOYD'S BILL (By Order)

Order for Second Reading read.

To be read a Second time upon Tuesday 24 March at 7 o'clock.

COUNTY OF KENT BILL [Lords] (By Order)

EAST SUSSEX BILL [Lords] (By Order)

Orders for Second Reading read.

To be read a Second time upon Thursday 26 March.

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

Common Fisheries Policy

Mr. Pollock: asked the Minister of Agriculture, Fisheries and Food what is the present stage in the negotiations for a common fisheries policy.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Alick Buchanan-Smith): I refer my hon. Friend to the statement which my right hon. Friend made to the House on 11 March.

Mr. Pollock: While understanding the need for reticence on the part of my hon. Friend at this delicate stage in the negotiations, may I nevertheless ask him to confirm, for the avoidance of doubt, that there is no question of reaching a settlement that would allow foreign vessels to fish right up to our beaches, as the French have recently demanded?

Mr. Buchanan-Smith: I give my hon. Friend that absolute assurance. In any negotiation or in any agreement, we must ensure not only adequate exclusive access for our vessels, but preference beyond that zone of exclusive access.

Mr. Mason: Is the Minister aware that the present state of the talks is one of deadlock, and that what concerns the House and indeed the industry is not only the point that has just been raised, namely, that pressure is being brought to bear by the French for access to our inshore waters, but that pressure is being brought to bear to get the Canadian cod deal settled with the Germans? Will he give an assurance that at the talks in Maastricht next week the Prime Minister will not trade off any of these matters and that we shall maintain the talks on achieving a common fisheries policy on their merits alone?

Mr. Buchanan-Smith: I assure the right hon. Gentleman that I am aware of all the pressures. I assure him also that there never has been any question of trading fish against any other issue. Fish is important to the United Kingdom and is a matter that must be dealt with on its merits.

Mr. Sproat: May I ask my hon. Friend whether the alleged dumping of cheap foreign fish was discussed at the latest talks?

Mr. Speaker: Order. I think that that matter arises on question 3.

Less Favoured Areas

Mr. Myles: asked the Minister of Agriculture, Fisheries and Food what is the level of production from the areas in the United Kingdom which are covered by the less favoured areas directive in each of the past five years.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Jerry Wiggin): The main component of production in less favoured areas is young stock from hill and upland cattle and sheep. Stocking figures for these groups reveal a decline in cow numbers between 1976 and 1980 of nearly 5 per cent., but an increase of 6 per cent. over the same period in the number of ewes.

Mr. Myles: In view of that reply and the considerable encouragement that the Government have given to this sector of agriculture, will my hon. Friend ensure that short-term economic considerations will not prevent that encouragement from continuing to be given?

Mr. Wiggin: It is, of course, for economic reasons that these matters are considered in the first place. I think that it would be impossible at this time of the year to anticipate the consideration that my right hon. Friend will give to the matter in the autumn. I think that the fact that he has already given two record payments for hill grants and subsidies indicates the depth of our feeling on this subject.

Mr. Bill Walker: The Highland farmers of Scotland greatly appreciate the help that has been given by the Government, but does my hon. Friend accept that I should be failing in my duty if I did not ask him to confirm that, whatever happens in the EEC negotiations, Scotland's hill farmers will still be recognised as an essential part of the agricultural community?

Mr. Wiggin: I do not have the slightest difficulty in giving that assurance. Indeed, the new sheep regime is one of the matters that will considerably help them.

Common Fisheries Policy

Mr. Wall: asked the Minister of Agriculture, Fisheries and Food if he will make a further statement on developments in the common fisheries policy and on the dumping of foreign fish in the United Kingdom.

Mr. Buchanan-Smith: On the first part of the question, I refer my hon. Friend to the statement which my right hon. Friend made to the House on 11 March. The team of officials and industry representatives which is investigating the allegations of dumping has made good progress, but has not yet completed its work.

Mr. Wall: I thank my hon. Friend for standing firm against both the French and the Germans. Is he aware that fish merchants are complaining about a lack of fresh fish and that trawlermen are complaining that the prices are too low? How will he reconcile those two points of view before reaching agreement on a common fisheries policy?

Mr. Buchanan-Smith: It is precisely because of our concern over the marketing of fish that my right hon. Friend has asked his marketing advisers to look into the whole question of marketing. That they are now doing, and that is in addition to the work of the team of officials who are investigating the dumping of imports. Therefore, work is very much in hand on both those matters.

Mr. Grimond: Have the Government received any fresh information from the Dutch Government about their inquiry into the possible illegal export of fish from Holland to this country?

Mr. Buchanan-Smith: We have been in touch with the Dutch Government. As I am sure the right hon. Gentleman will have noticed from press reports, the main problems about fish coming from Holland directly relate to the difference in the currencies between the two countries. That, more than anything else is causing these imports.

Mr. Sproat: In view of the continuing and severe problems caused to the British fishing industry because of the dumping of cheap foreign fish, when does my hon. Friend hope to come forward with a financial aid package to the industry? Is the industry right in thinking that he is considering providing about £28 million?

Mr. Buchanan-Smith: I ask my right hon. Friend to have patience. As the industry knows, the Government understand its needs and have already shown by what they did last year that where action is needed they are prepared to take it. I must ask my hon. Friend to wait a little longer.

Mr. James Lamond: If the use of the word "dumping" in the question suggests that the fish are cheap, will the Minister inform consumers at which retail outlets they can buy that cheap fish?

Mr. Buchanan-Smith: I refer the hon. Gentleman to that body for which I know he has a great respect, the White Fish Authority, whose survey showed that there had been a reduction in the retail price of fish. I believe that that has been overlooked by those who are seeking to make headlines.

Mr. Lang: In his negotiations, will my hon. Friend bear in mind the particular problems facing the shellfish industry, which is an important industry in Kirkcudbright in my constituency?

Mr. Buchanan-Smith: I confirm that the shellfish industry is not only important to Kirkcudbright, but is an

important source of foreign earnings. It is an industry with an extremely good export record. I assure my hon. Friend that, in the interests of the United Kingdom as a whole, I shall do all that I can for that section of the industry.

Mr. Mason: May I take it that the inquiry taking place by the team of officials and industry representatives into the dumping of cheap fish will be carried on separately from the CFP talks, and that it will not be held up until the outcome of those talks? If that is so, when are we likely to know the outcome of the discussions with the industry?

Mr. Buchanan-Smith: The discussions with the industry about imports are continuing. A meeting was held yesterday at which I understand good progress was made. The two sides hope to meet again in the near future. I cannot anticipate the outcome. As to the broader meetings with the industry about financial aid, we shall come forward with proposals as soon as we are ready to do so.

Agricultural Production (Marketing)

Mr. Peter Fraser: asked the Minister of Agriculture, Fisheries and Food what measures he is making to improve the marketing of agricultural production.

The Minister of Agriculture, Fisheries and Food (Mr. Peter Walker): I am discussing with several sectors the potential for improved marketing. I am particularly concerned to see producers, processors and distributors work more closely together. I am following with interest the discussions on a possible new central marketing body.

Mr. Fraser: Whatever consideration my right hon. Friend may still have to give to the funding proposals contained in the marketing working party report of the BAC, will he publicly give his approval to the four principles on which it says that it is necessary to base a marketing strategy—namely, the establishment of consistent quality standards and continuity of product availability, awareness of the requirement of the final consumer, co-ordination of promotion, and priority to export activity?

Mr. Walker: Yes.

Mr. Geraint Howells: Does the Minister agree that if we are to survive we shall have to improve our selling methods within the Community, instead of selling our surpluses to the Russians at give-away prices?

Mr. Walker: There is terrific scope within the Community for British agriculture and food products. It is interesting to note that in a number of spheres considerable expansion is now taking place.

Mr. Adley: Is my right hon. Friend aware that the marketing of frozen chickens by United Kingdom chicken processors is being hampered by the different standards of health inspection in this country and in other EEC countries? For example, is he prepared to recommend that one way of overcoming the problem is to have an international interchange of inspectors, so that our inspection standards are imposed on processing factories in other EEC countries?

Mr. Walker: I am not particularly determined to direct our inspectors to go to foreign parts. However, I am glad to say that the Commission has agreed to come forward in the near future with proposals so that, both in terms of the


standard of enforcement and the method of payment for that enforcement, an identical system operates throughout the Community.

Mr. James A. Dunn: Will the Minister pay particular attention to the need to provide for any regional variation that might be required in any central purchasing organisation, or any central system, that he is helping to create, or perhaps even sponsoring? Will he have special regard to Northern Ireland?

Mr. Walker: There is a range of specific problems in Northern Ireland affecting both agriculture and horticulture. Primarily, those matters are the responsibility of my right hon. Friend the Secretary of State for Northern Ireland. I know that he is reviewing them with the farming organisations.

Glasshouse Growers (Energy Costs)

Mr. Newens: asked the Minister of Agriculture, Fisheries and Food if he has yet made any agreement with other members of the European Economic Community to equalise the cost of energy used by glasshouse growers in different member countries; and, if not, if he will give special assistance to British producers.

Mr. Wiggin: The European Community Commission has repeatedly challenged the Dutch over their gas prices in the glasshouse sector and called on them to cease unfair practices. We are expecting the Dutch reply to the Commission by the end of this month. I cannot anticipate their response.

Mr. Newens: It is just not good enough to continue to wait. Is the Minister aware of the crippling disadvantage at which British growers have been placed as a result of higher interest charges, the high rate of sterling and the inordinate cost of energy compared with their Dutch counterparts? Would it not be cheaper to pay an £8 million subsidy, as has been proposed by United Kingdom producers, costing £400 per head, than to support people who will become unemployed at a cost of £2,000 per head? Does the Minister want the industry to survive, or is he prepared to see it go down the drain?

Mr. Wiggin: We are seeking to do all that we can within the legal framework of the Community. The fact that we are expecting an answer on this matter within a fortnight shows that my right hon. Friend has been pushing it continuously at every opportunity, and he will go on doing so.

Mr. Stephen Ross: What answer did the Secretary of State give to the large number of glasshouse growers and horticulturists, of whom I was one, although I had to leave early, when they demonstrated outside the Ministry on Friday? Things have surely come a long way when these people have to demonstrate against a Government for whom most of them voted.

Mr. Wiggin: As I have already said, our insistence on an answer within 14 days puts a deadline on this, which no one else wanted to do, and that is right and proper.

Mr. Colin Shepherd: Is it not permissible within the rules of the Community for temporary assistance to be given, based on the difference in fuel prices since January 1978?

Mr. Wiggin: The Community rules contain guide lines for providing special assistance. The rules are not necessarily the only drawback.

Mr. Mark Hughes: Does the Minister not realise that another fortnight will make the problem of our glasshouse growers this season intolerable, and that unless the Government introduce special aid for them there will be an enormous number of bankruptcies, which no one will welcome?

Mr. Wiggin: Although I was not present, I am told that the growers, who were told that a decision would be forthcoming within weeks, were pleased to hear that a date had been fixed. Their interpretation of the delay was not that expressed by the hon. Gentleman.

Mr. Adley: Is my hon. Friend aware that many of these people have already gone out of business? Does he accept that knowing that an answer will come in two weeks, without knowing what it is to be, is not much comfort unless there is an absolute assurance that the Government will take the steps recommended if we do not get the answer that we hope for?

Mr. Wiggin: The Government will respond. We, too, are acutely aware of the difficulties.

Egg Production

Mr. Farr: asked the Minister of Agriculture, Fisheries and Food what is the United Kingdom level of self-sufficiency in egg production.

Mr. Buchanan-Smith: United Kingdom self-sufficiency in egg production in 1980 is estimated to have been 99 per cent.

Mr. Farr: With the continuing fall in United Kingdom chick production and the rise in placings in Holland and France, what level of self-sufficiency does my hon. Friend expect the egg industry to achieve by the end of June? Is it likely to be satisfactory? If not, what does he intend to do?

Mr. Buchanan-Smith: Such matters depend on the level of demand and so on. On the figures available it appears that we shall be marginal net importers of eggs this year, but I emphasise that any change must be small when we are near 100 per cent. self-sufficiency.

Poultry Industry

Mr. Cockeram: asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the progress of his Department's efforts to ensure that the United Kingdom's poultry industry does not continue to be at a disadvantage compared with other European Economic Community poultry producers.

Mr. Peter Walker: The Commission is expected to make proposals very shortly to harmonise inspection standards and methods of charging. It is still considering certain information we sent it on State aids to processors of poultrymeat in France. As regards the recently announced income aids to French farmers, the Commission has now opened proceedings against France under the State aid provisions of the Treaty of Rome.

Mr. Cockeram: Is my right hon. Friend aware of how disappointing that answer will be to the United Kingdom


poultry industry, because it offers no help with interim problems? Is he aware that Midland Poultry Holdings in my constituency, one of the largest United Kingdom producers, has been offered French birds at well below the cost of production in this country? What does he intend to do to help the industry with its interim problems?

Mr. Walker: My hon. Friend will know that because of the problems only a few weeks ago I provided an additional £2 million of aid to the industry. The poultry industry will be pleased to know that the Commission is making proposals to standardise charges and standards of supervision.

Miss Maynard: Are poultry producers in other EEC countries receiving subsidies, direct or indirect? If so, why cannot our producers have the same subsidies so that they can compete on equal terms? Do European hygiene standards comply with our import standards? Will the Minister negotiate compensation for redundant poultry workers similar to that for dairy farmers?

Mr. Walker: The purpose of the so-called compensation for dairy farmers is to enable them to move to activities that are not in surplus in Europe. The Commission has proposals to standardise inspection standards and methods of charging. The Government gave additional aid to the industry before those decisions were taken. On the general question of national aids, one of the most important issues in the Community is the degree to which some countries—and one in particular—are giving substantial national aids, which pervert competition in Europe. That problem must be at the forefront of the Commission's activities in the coming months.

Mr. Peter Fraser: Will my right hon. Friend take action to ensure greater uniformity in the application of inspection standards by local authorities? Is he aware that some United Kingdom poultry producers are even more disadvantaged than others?

Mr. Walker: That is one reason for providing aid. Gradually, more conformity is being established in the United Kingdom.

Mr. Mark Hughes: Does the Minister accept that the arrangements for the poultry industry are disadvantageous to British producers? Unless he takes action urgently, many poultry producers, like glasshouse growers, will be forced out of business.

Mr. Walker: I did not approve the regulation. That was done by my predecessor. I have come forward with the additional money necessary to see the poultry industry through this phase. Obtaining standardised methods of enforcement and payment will be a big step forward. The previous Administration did not achieve that.

Sheep Industry

Mr. Richard Wainwright: asked the Minister of Agriculture, Fisheries and Food if he is satisfied with the present state of the sheep industry; and if he will make a statement.

Mr. Buchanan-Smith: Yes, Sir. The new sheepmeat regime has brought major benefits.

Mr. Wainwright: Does the Minister accept that the House will be glad to hear that? Is he aware that reports from the North of England suggest that in this lambing

season the destructive worrying of sheep by uncontrolled dogs is worse than ever, which is perhaps not surprising in the present economic climate? In drawing the matter to the attention of the Secretary of State for the Environment, will he warn him of the valuable proposals of the report of the working party on dogs five years ago and ask him to implement them without delay?

Mr. Buchanan-Smith: One may blame the EEC for many things, but we cannot blame it for dogs worrying sheep. We certainly cannot blame the sheepmeat regime. However, the hon. Gentleman has raised a serious point at a timely moment. I hope that dog owners will pay attention to what has been said.

Mr. Kimball: Is my hon. Friend aware that sheep production is the most flourishing and successful sector of agriculture? Is he further aware that every prediction of his right hon. Friend last autumn about future prices has been more than met? Will he ensure that nothing is done in the forthcoming negotiations in Europe to destroy the great confidence that is building up in the industry?

Mr. Buchanan-Smith: I am grateful to my hon. Friend for what he says. The sheepmeat regime has considerably helped our sheep producers. However, some aspects, particularly exports, give us cause to worry. We hope to raise such matters in the price review.

Mr. Strang: Will the Minister acknowledge that the clawback in the EEC sheepmeat regime has brought to an end the lamb trade with the Continent, when it should be increasing? Will he make it clear that the Government do not accept that and are determined to reverse it in the present price negotiations?

Mr. Buchanan-Smith: I hope that the hon. Gentleman, in turn, will acknowledge that the clawback has been cancelled for third country exports. The language that he uses is out of place. A change has taken place in the pattern of trade with European countries, but I hope that he will not be disappointed to learn that the level of trade in 1980–81, between November and January, is similar to that of the previous year. It is a distortion to say that trade has been brought to a halt.

Mr. McQuarrie: Is my hon. Friend aware of the rumour that the French intend to disrupt the entry of sheepmeat to France again this year? If that is correct, when he is in Brussels will he let the French know in no uncertain manner that he will not tolerate it?

Mr. Buchanan-Smith: If my hon. Friend has evidence of that, I should like to know of it. We have consistently defended the interests of our sheep producers, and we shall continue to do so.

Price Review

Mr. Temple-Morris: asked the Minister of Agriculture, Fisheries and Food if he is now in a position to make a statement on the outcome of the European Economic Community price review.

Mr. Peter Walker: Last week, in the Council of Ministers, the Commission's proposals on farm prices were discussed and views were put by each member country. The main discussions will take place at the beginning of April. I hope that before then we shall have a debate in the House.

Mr. Temple-Morris: Is my right hon. Friend aware that he has much support in the attempt to restore prices to a realistic level for the British farmer? Will he communicate to his Treasury colleagues the necessity of looking after the countryside, which just about still supports the Conservative Party?

Mr. Walker: On farm prices and the green pound, the Government are determined to see that the position of British agriculture is protected in the current negotiations. We must also, naturally, have a degree of interest in the impact of the common agricultural policy as a whole and the cost of the budget. assure my hon. Friend that it is the intention of the Government to see that British agriculture continues to prosper.

Mr. Torney: In his discussions on the price review, will the Minister bear in mind the serious condition of the British poultry industry and its need to achieve some advantage from the review? This industry used to provide a great deal more employment than the glasshouse and fishing industries, which, under the right hon. Gentleman's control, are now in dire straits. There is considerable unemployment in the poultry industry, with a number of bankruptcies looming up. Will the right hon. Gentleman take the opportunity of the price review to remedy the situation?

Mr. Walker: I welcome the hon. Gentleman's interest in employment in the poultry industry. I wish that a similar interest could be shown by the party of which he is a member, instead of its making constant demands for large green pound revaluations, which would do great damage to British agriculture.

Mr. Peter Mills: Will my right hon. Friend remain firm in his view that there should be no revaluation of the green pound and that there should be a fair return for British producers? More importantly perhaps, will he try to prise open the mind of the Shadow Minister of Agriculture, Fisheries and Food, so that we know exactly where the Opposition stand? Rumours are circulating that the Opposition want a revaluation of the green pound and no increase in prices to the farmers, which would be disastrous for the producer, the consumer and those who work in the meat plants.

Mr. Walker: I find it extraordinary that when farm incomes, in real terms, have gone down by 24 per cent. a major political party should advocate that they should be reduced still further. The position of the Opposition will perhaps be revealed in next week's debate.

Mr. Mason: On the basis of a positive MCA of about 18 per cent., are we not denying our consumers cheaper food and, at the same time, swelling our contribution to the Common Marker budget? Based on a positive MCA of 18 per cent., are we not granting £500 million or £600 million a year to our farmers' incomes? On that basis, is the right hon. Gentleman saying that under no circumstances, in the present review, will he agree to a revaluation of the green pound?

Mr. Walker: I say clearly to the right hon. Gentleman that in the period when the Labour Government had negative MCAs of between 24 and 45 per cent. food prices in this country went up twice as fast as they have under this Government. Secondly, I am saying that the positive MCAs do not improve farm prices at the farm gate in this

country. What the right hon. Gentleman seemingly advocates is that they should be reduced still further. That is a dangerous policy to pursue.

Mr. Mason: Is the Minister saying that under no circumstances, in the forthcoming agricultural price review, will he agree to any percentage revaluation of the green pound?

Mr. Walker: I am saying categorically that, on the Commission's proposals for the coming price review and its suggested increases, there will be no revaluation of the green pound.

Mrs. Kellett-Bowman: Does my right hon. Friend agree that the Agriculture Committee of the European Parliament was right yesterday to emphasise the need to discourage the production of commodities in surplus and to encourage those that are not in surplus? Will he accept that I am delighted to hear him turn down suggestions for a green pound revaluation which would not help British housewives in regard to prices, and which would be damaging to our farmers?

Mr. Walker: I appreciate what my hon. Friend says. I recognise the immense damage done to British agriculture, food manufacturers and food processors by the appalling policy of the previous Government of having negative MCAs.

Pig Industry

Mr. Penhaligon: asked the Minister of Agriculture, Fisheries and Food if he is satisfied with the present state of the pig industry; and if he will make a statement.

Mr. Buchanan-Smith: The three devaluations of the green pound in 1979 removed one of the major problems and there was improvement in producers' returns in 1980.

Mr. Penhaligon: That is true. Is the Minister not aware, however, of the assistance given to Irish exporters of pig and bacon meat in order to cover their health inspection charges? Will the Government consider giving similar aid to British slaughterers to enable them to compete against these imports on an equal basis?

Mr. Buchanan-Smith: I agree with the hon. Gentleman that any national aids that lead to unfair competition have to be dealt with carefully. That is a point that we made to the Commission.

Mr. Colin Shepherd: Is it not the case that during the period of office of the Labour Government the negative MCAs smashed the cooked pigmeat industry in this country? Is it not the case also that the retention of positive MCAs will extend the hope of the United Kingdom pigmeat industry that it will be restored to its proper position?

Mr. Buchanan-Smith: There is no doubt that if we did not have the positive MCAs conditions would be infinitely worse for the United Kingdom pig industry. It is an important section of our agriculture industry. I believe that in the coming price review we have to look closely at the balance between cereals and livestock. This is one sector of our industry that can suffer if we get that balance wrong.

Beef

Mr. Robert Atkins: asked the Minister of Agriculture, Fisheries and Food what proportion of home produced beef was supplied from the dairy herd in the past year within the United Kingdom.

Mr. Buchanan-Smith: About two-thirds.

Mr. Atkins: Many of my hon. Friends will be grateful for that answer. Will my hon. Friend consider making a change in the grading standards that will allow more dairy-bred beef to come within the area of premium payments?

Mr. Buchanan-Smith: One of the hallmarks of British beef is its high quality. It is important to do everything that we can to maintain that high quality. I assure my hon. Friend that we re-examine the standards from time to time. If he has a worry about this, I should be grateful if he would let me know. I must point out that of the animals presented for certification, over 92 per cent. are accepted. I do not believe that that indicates a great problem.

Mr. Strang: Has the Minister had an opportunity to study the figures released today by the Meat and Livestock Commission, which indicate a record increase in beef and veal exports? Can he say whether these exports have been swollen by a significant increase in the slaughtering of United Kingdom dairy cows? If that is so, is it a matter of concern to the Government?

Mr. Buchanan-Smith: The Government are, naturally, concerned if there is any effect on our breeding stock. I am concerned generally about beef production. There has been a small decline over the last 12 months. It is a decline that began before then. This is an area which, like the pig industry, requires a great deal of attention in the price review.

Mr. Myles: Will my hon. Friend consider the effect of the introduction of Holstein blood into the dairy herd on the beef that is produced? Does he consider that, because of the volume of beef coming from Holstein blood, there might have to be a change in the grading standard?

Mr. Buchanan-Smith: I hesitate to become involved in interbreed rivalry of any sort. I know that in certain areas the Holstein breed has proved successful in its contribution to our dairy industry.

Dairy Industry

Mr. Alton: asked. the Minister of Agriculture, Fisheries and Food if he satisfied with the present state of the dairy industry; and if he will make a statement.

Mr. Peter Walker: Yes, Sir. I believe that the United Kingdom dairy industry can continue to improve its structure and efficiency in response to prevailing economic circumstances. In view of a point raised by the Opposition Front Bench, I am pleased to say that slaughterings in January 1981 are 21 per cent. down on the high level of January 1980.

Mr. Alton: Would it not be beneficial to consumers and producers if the co-responsibility levy were abolished?

Mr. Walker: As a matter of principle, it is better to have a reduction in price than a co-responsibility levy. The super levy proposed by the Commission, which will prevent and stop increases in production, and therefore decrease surpluses, has considerable merit.

Mr. Maxwell-Hyslop: Will my right hon. Friend take every opportunity to remind the Opposition Front Bench that if the dairy industry is strangled by the debt carried over from the under-recruitment when the Labour Government were in office it will not be able to play its part in the recovery of the engineering industry in the Midlands, which used to provide such a large market?

Mr. Walker: One of the important arguments for keeping British agriculture in a position of some prosperity and expansion is that otherwise many jobs in manufacturing, in the agricultural machine industry and in food processing will be at stake.

Mr. Newens: Will the right hon. Gentleman assure the House that he will in no circumstances agree to any package deal with our partners in the EEC that involves accepting concessions in the dairy trade that are damaging to milk rounds in order to gain advantages in other spheres?

Mr. Walker: Yes, I can give that absolute assurance. One of the most important features for our dairy industry is the continuation of the doorstep delivery service. I shall not take action that undermines that service.

Mr. Nicholas Winterton: I recognise the difficult job that my right hon. Friend is seeking to do within the EEC to achieve reform, but is he aware of the dire plight of our dairy and livestock industries? Far from expanding, the dairy herd is being reduced and the incomes of dairy farmers are dropping dramatically. Will my right hon. Friend give some assurance to the industry that it has a future, following the negotiations that are taking place within the EEC?

Mr. Walker: Three positive green pound devaluations and a substantial increase in the price of liquid milk have helped. I am pleased to tell my hon. Friend that in January slaughterings were 21 per cent. down on the year before and the number of heifers in calf was up on the previous year. The price of a dairy cow is substantially higher now than a year ago. Those factors demonstrate that there is a degree of confidence in the industry.

Tenant Farmers

Mr. Allen McKay: asked the Minister of Agriculture, Fisheries and Food how many tenant farmers have lost their farms due to the Agricultural Holdings (Notices To Quit) Act 1977 during the last 12 months.

Mr. Wiggin: The agricultural land tribunals approved 17 notices to quit under the Agricultural Holdings (Notices to Quit) Act 1977 in the 12 months ending 31 December 1980.
I regret that information about notices to quit that were not contested before an agricultural land tribunal is not available.

Mr. McKay: Does the hon. Gentleman agree that it is scandalous that tenant farmers can be turned off their land merely for monetary purposes? Will he ask his right hon. Friend to consider the case in my constituency involving James Clegg, who will increase the statistics this year by one because he will be turned off his land as a result of the 1977 Act? Does the hon. Gentleman agree that it is time for the Act to be reconsidered?

Mr. Wiggin: The Act was put on the statute book when the Labour Government were in office. I do not wish to


become involved in an argument about the rights and wrongs of the Act. We are satisfied that the proper procedures were followed in the case that the hon. Gentleman has mentioned. We cannot have a replay in the House of all tribunal decisions.

Mr. Myles: Does my hon. Friend agree that measures taken by our right hon. and learned Friend the Chancellor of the Exchequer in the Budget will help to increase the availability of farms to rent?

Mr. Wiggin: Having been responsible for moving amendments to that effect when the Labour Government were in office, I am delighted with my right hon. and learned Friend's proposals. I agree with my hon. Friend that they will help the rented sector considerably.

Milk Products (Co-responsibility Levy)

Mr. Allan Stewart: asked the Minister of Agriculture, Fisheries and Food what effect the European Economic Community Commission's proposals for a co-responsibility levy will have on United Kingdom milk producers.

Mr. Peter Walker: The Commission has proposed that the basic co-responsibility levy should remain unchanged, except that it has proposed that a 6 per cent. levy should apply to milk from farms using intensive production methods. I find this proposal totally unacceptable. It would discriminate against producers in the United Kingdom and I will not agree to it.

Mr. Stewart: I am most grateful to my right hon. Friend for that reply. In looking to the future, will he ensure that any co-responsibility levy will not militate against milk that our producers have to sell for manufacture because of imports of liquid milk from other countries in the EEC?

Mr. Walker: Yes.

Fish Imports

Mr. Beith: asked the Minister of Agriculture, Fisheries and Food whether he has completed his inquiries into fish imports.

Mr. Buchanan-Smith: I refer the hon. Gentleman to the answer I gave earlier to my hon. Friend the Member for Haltemprice (Mr. Wall).

Mr. Beith: Does the hon. Gentleman realise the anxiety that exists in the industry about imports? Cod, which used to fetch £35 a box two years ago, is appearing on the market for less than half that price. Does he realise that the scale of cod imports is something that the industry has never previously experienced?

Mr. Buchanan-Smith: The hon. Gentleman might be interested to learn that in January 1981 less cod was imported than in the previous year. I agree with him about the problem of prices. It is precisely for that reason that we have set up an investigation into imports and why we are examining the financial state of the industry. We hope shortly to come to a conclusion following our examination.

Mr. Kimball: Does my hon. Friend realise that the greatest contribution that he could make to the preservation of fish stocks would be to persuade the

Northumberland river authority to abolish the 50 licences that it has issued for drift netting for salmon off the Northumberland coast?

Mr. Buchanan-Smith: I am sure that the hon. Member for Berwick-upon-Tweed (Mr. Beith) will have noted my hon. Friend's observation.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Adley: asked, the Prime Minister if she will list her official engagements for 19 March.

The Prime Minister: This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today. This evening I shall attend a banquet given by President Shagari of Nigeria.

Mr. Adley: Is my right hon. Friend aware that some local authorities that are still opposed to the sale of council houses are regarding the Housing Act 1980 as a hurdle to be overcome rather than a law to be obeyed, and that some councillors and officials are harassing, bullying and flying to coerce tenants out of their rights? Will she please today condemn that activity and assure tenants who want to buy that the Government will stand firmly behind them and do everything that they can to help?

The Prime Minister: Yes, gladly. The law on council tenants' rights must be obeyed. The Government have reserve powers. We are in touch with the 16 authorities in England that are dragging their feet over giving tenants those rights. We have acted with some speed. If need be, we shall not hesitate to use our reserve powers.

Mr. Jay: Does the right hon. Lady feel that her economic policies have produced the results that she intended?

The Prime Minister: Perhaps the right hon. Gentleman will wait a little longer.

Mr. John Browne: Will my right hon. Friend please confirm that to employ people on a discriminatory basis on grounds of race, colour or creed is illegal in Britain? If that is so, will she tell the House for how much longer she intends to allow the existence of employment on the discriminatory basis of whether of not an individual is a member of a trade union? The closed shop is blatantly unjust and blatantly against Britain's interests.

The Prime Minister: I agree with my hon. Friend that one or two recent cases have aroused the wrath of the British people. I think that the British people are wholly against the sacking of Joanna Harris by a municipal authority. They regard that as a disgrace to that authority. I hope that all those who feel as I do will contact my right hon. Friend the Secretary of State for Employment and make their views clearly known on the consultative document, which envisages the possibility of further legislation.

Mr. Healey: As it is now clear that the Budget has added massive new burdens to British industry by raising the exchange rate by 4½ per cent. compared with its level at the beginning of the month and by increasing the price of energy for industry, will the right hon. Lady give


industry the little psychological boost that she promised on television recently by cutting the minimum lending rate by at least a further 2 per cent. and tabling an amendment to the Finance Bill to cut the price of diesel fuel, which is now a third higher than the price in France and 50 per cent. higher than in Germany?

The Prime Minister: The answer is "No, Sir". If the level of public expenditure that the right hon. Gentleman had planned was in operation there would have to be even higher taxes and far higher interest rates than those that prevail now.

Mr. Healey: The Prime Minister cannot continue to attack the Labour Government on the level of public expenditure—

Mr. Robert Atkins: She can.

Mr. Healey: She cannot attack that Government for failing to cut public expenditure when she occasionally poses as the Prime Minister.

The Prime Minister: We have brought public expenditure down to well below the level at which the right hon. Gentleman left it—[Interruption.] It is well below what he had planned. Had we continued on his course—[Interruption.] It is well below what the right hon. Gentleman had planned. Had this Government been on the right hon. Gentleman's course, we should have been on the way to the IMF by now.

Mr. Allan Stewart: Does my right hon. Friend agree with me in commending the sense of realism that was displayed yesterday by the work force at the Talbot factory at Linwood in rejecting the extremist and irresponsible course of action urged upon it by the Labour and Scottish National Parties, which would have damaged the image of industrial relations in the West of Scotland?

The Prime Minister: Yes. I join my hon. Friend in welcoming that wise action.

Mr. William Hamilton: asked the Prime Minister if she will list her official engagements for 19 March.

The Prime Minister: I refer the hon. Gentleman to the reply which I gave some moments ago.

Mr. Hamilton: Has the Prime Minister seen the reports in today's newspapers that Shell intends to increase petrol prices by 5p, in addition to the 20p that has already been imposed by the Budget? In view of the right hon. Lady's known concern for the welfare of rural communities, is she determined to retain the 20p increase in the Budget, as well as the 5p that is threatened by Shell and other oil companies?

The Prime Minister: The hon. Gentleman and many others are only too anxious to increase public expenditure. We have to meet the public expenditure that is already agreed, and even the taxes that the Chancellor has proposed are not sufficient for that purpose and we have to raise a further £10½ billion. We took the view that the top priority for industry was to get down interest rates. They are now down by 5 per cent from their peak.

Mr. Bill Walker: Has my right hon. Friend had an opportunity during her busy day to look at the comments that are attributed to the right hon. Member for Bristol, South-East (Mr. Benn), which suggest that we in Britain are conducting a battle similar to that in Zimbabwe for

independence from the European Economic Community? Will she condemn that and confirm that Government policy is to arrange for matters within the EEC to work for the benefit of this country and all the other members of the EEC?

The Prime Minister: If those remarks really represent what the right hon. Member for Bristol, South-East (Mr. Benn) thinks, they are not worthy of comment.

Mr. James Lamond: Does the right hon. Lady believe that her Government have played their proper part at the Madrid conference? If so, can she tell us of any concrete, constructive proposal that has been put forward by the British delegation to assist disarmament in Europe and the building of confidence between the nations that were represented at that conference?

The Prime Minister: One main element is needed to build confidence, both at the Madrid conference and in other international relationships, and that is the withdrawal of Soviet troops from Afghanistan.

Mr. Farr: Will my right hon. Friend find time today to look at the worrying situation that has arisen in connection with American textile exports to Britain, particularly synthetic textiles, and the deplorable fact that apparently President Reagan has taken no action about subsidised gas prices in America? Is my right hon. Friend aware that 100,000 jobs were lost in the textile industry last year, and that a similar calamitous decline is possible this year?

The Prime Minister: We have referred the matter to the European Commission. I am well aware of the problem. However, it should be pointed out that President Reagan has de-regulated oil prices. That was a courageous step, and I hope that it will be followed by further action on gas prices.

Mr. Grimond: When the Prime Minister meets the President of Nigeria today, will she discuss the difficulties of African students who want to come to universities in this country?

The Prime Minister: We have already done that. We pointed out that those overseas students who were at university when the increased fees came in could carry on at the former fees. My right hon. Friend the Foreign Secretary has a budget to help overseas students to pay increased fees. It amounts to about £42 million a year, which is equal to 10,000 students. That is not ungenerous.

Mr. Ward: Has my right hon. Friend had time today to look at The Daily Telegraph report that the level of redundancy payments to miners may well go up to £42,000? Is she not concerned that this and other payments by the nationalised industries compare badly with what private industry can afford because many firms can pay only the minimum statutory level of redundancy payment, which, at its best figure, is £3,900? Is she not concerned that that money can come only from the private sector, which is already hard pressed?

The Prime Minister: I understand the resentment that is felt about redundancy payments in nationalised industries, particularly that felt by small businesses. Nevertheless, it is to the benefit of the country that we reduce the number of mines that are loss-making so as to reduce the price of coal, which in turn would reduce the price of electricity. The increased redundancy payments


are being made so that some of the mines that are producing coal at a very high cost can go out of action. That will be to our benefit. These are not wholly mineworkers' redundancy payments. They are the total payments available under some three Acts.

Mr. Sheerman: asked the Prime Minister if she will list her official engagements for Thursday 19 March.

The Prime Minister: I refer the hon. Gentleman to the reply which I gave some moments ago.

Mr. Sheerman: Can the Prime Minister spend some time today considering the announcement that GKN, our biggest engineering company, has lost £1·2 million in the past year, and in view of the fact that ICI, Britain's largest chemical company, has also made a loss this year, what can the Government do to prevent every industry from going bankrupt?

The Prime Minister: Certainly a number of engineering companies, including GKN, have reported bad results. They would be in a much better position if the 1·5 million cars that were sold in this country last year had included far more British cars. That would have had an effect on the steel and engineering industries. The best way to help other companies is for more people to buy British.

Mr. Fox: I am sure that my right hon. Friend is aware that, of the two Inland Revenue computer centres to be closed as a result of the Civil Service dispute, one is in my constituency. Is she aware that many of my constituents who work there are opposed to the strike? One of them wrote:
We are delighted with the 7 per cent. on offer and trust the Government to see we are paid fairly in the future and in accordance with what our country can afford.

The Prime Minister: I am grateful for what my hon. Friend says. I believe that the vast majority of people in the Civil Service, knowing that their pay this year is 50 per cent. higher than it was two years ago, and having been offered 7 per cent. on top of that, are of the opinion that this is a fair and honourable deal and are staying at work for that reason.

Mr. Healey: In view of the fact that the heads of both GKN and ICI attributed their appalling results largely to Government policy, interest rates and the exchange rate, will the Prime Minister take action to bring those down, since in real terms interest rates are still substantially higher than they were a year ago and, as a I said earlier, the exchange rate has risen 4½ per cent. in the past few weeks?

The Prime Minister: The right hon. Gentleman is not the right person to give advice about exchange rates, bearing in mind that he brought it to an all-time low of $1·56.

Mr. Stanbrook: asked the Prime Minister if she will list her official engagements for Thursday 19 March.

The Prime Minister: I refer my hon. Friend to the reply which I gave some moments ago.

Mr. Stanbrook: Will my right hon. Friend find time this afternoon to remind the Opposition and some of her own hon. Friends that if we are to maintain and extend the reduction in the minimum lending rate we must curb Government borrowing, and that that means hard and unpopular measures in the Budget?

The Prime Minister: That is so. We have to persuade people to lend money to the Government. If we demand too much they will give it only at an unusually high interest rate, and that would spill over on to all those in industry who wish to borrow. It is vital to the future of investment and stockbuilding that the interest rate should be kept down, and that means putting up taxes higher than we should otherwise have wished and trying to keep down future expenditure.

Mr. Cryer: asked the Prime Minister if she will list her official engagements for Thursday 19 March.

The Prime Minister: I refer the hon. Gentleman to the reply which I gave some moments ago.

Mr. Cryer: Has the Prime Minister seen the report that the Civil Service unions have discovered the secret payments centres at Edinburgh and Leeds and are, in consequence, stepping up their action? Is she aware that they are doing this to demonstrate that they have a valuable function in the community—contrary to the continuing sneers of the Government and Members of the Conservative Party—and to demonstrate also that they have muscle? Is she aware that, following her settlement with the miners, all trade unionists now understand that the only language to which the Government will listen is that of trade union muscle? Is she aware that that is the language that the Civil Service is being forced to use?

The Prime Minister: I hardly think so. Before the Government came into office civil servants and others in the public service suffered grievously under the last Government's incomes policies. They did not have a fair deal then but they got a fair deal under this Government.

Fishing Vessel "Celerity"

Mr. David Myles: (by private notice)asked the Secretary of State for Trade if he will make a statement on the Buckie-registered fishing vessel "Celerity" reported missing in the Pentland Firth yesterday.

The Under-Secretary of State for Trade (Mr. Reginald Eyre): The fishing vessel "Celerity" sailed from Kinlochbervie at 2130 on Tuesday 17 March with a crew of six on board, bound for Peterhead.
At 0620 on 18 March the fishing vessel "Crystal Sea" alerted the coastal radio station at Wick that she had lost radar contact with the fishing vessel "Celerity" in suspicious circumstances. The "Crystal Sea" had been steaming approximately five miles astern of the "Celerity" and both vessels were heading eastbound into the Pentland Firth. Weather conditions at the time were severe, with heavy snow squalls.
The coastguard alerted all ships in the area and mounted an air search, which was continued until nightfall. A check of harbours and a coastline search was also carried out by the coastguard. The air search was resumed and widened this morning, using an RAF Nimrod and a Shackleton, and continued until 1500.
I regret to say that no trace of the "Celerity" or its crew has been found and it is my very sad duty to have to inform the House that the vessel must be presumed lost. My Department has ordered a preliminary inquiry into the loss of the vessel.
I am very conscious of the fact that the community of Buckie, which relies so much on the traditional skill and fortitude of its fishermen, has paid a particularly heavy and tragic price in recent times. I am sure that hon. Members would wish to join me in expressing deepest sympathies for the families and relatives of the crew of the "Celerity" and I should be grateful if my hon. Friend would convey this message to the people of Buckie.

Mr. Myles: I thank my hon. Friend for that sad statement. I shall certainly carry the sympathy of the House to the relatives of the unfortunate men from Buckie and Portgordon when I visit them at the weekend.
I greatly deplore the fact that this is the fourth fishing vessel that has been lost from Buckie since I became a Member of Parliament. First we lost the "Corinthia", then the "Ocean Monarch", and then the "Bounteous". Surely that is too many.
The crew consisted of Sandy Bruce, aged 38, of 7 Cathay Terrace, Cullen, who was a very competent skipper. His grandfather pioneered motor fishing vessels out of Buckie. Other crew members were John Innes, of South View, Buckie; Francis Goodall, of 28 McKenzie Road, Buckie; Richard Clark, of 10 Linn Crescent, Buckie; George Reid, of 126 Douglas Crescent, Buckie; and William Grant, a son-in-law of Richard Clark, of 28a Gordon Street, Portgordon.
Will my hon. Friend do everything possible to prevent such a tragic occurrence being repeated? The dangers to which fishermen are exposed far exceed the dangers facing any other sector of the community. Therefore, the Department must recognise its great responsibility. We all have a responsibility to secure the economic viability of the fishing industry.

Mr. Eyre: I note with regret my hon. Friend's comment. My Department realises fully its responsibilities

to the fishing industry. With the fishing industry safety group, my Department is doing all that it can—and successfully—to raise safety standards in the industry. It is recognised to be a perilous industry.

Several Hon. Members: rose

Mr. Speaker: Order. Although this is a private notice question, in view of its substance I shall call the three hon. Members on the Government Benches who have tried to catch my eye and the two right hon. Members and one hon. Member on the Opposition Benches.

Mr. Bruce Millan: May I on behalf of my right hon. and hon. Friends express our sympathy for the relatives and friends of the men who are lost? This is not the first grievous loss in that area. It reminds us that fishing is still a hazardous occupation.
We note that there is to be an inquiry. In view of the recurrence of such losses in recent years, I hope that it will be a wide-ranging inquiry. It is extremely worrying that there have been a number of such tragedies in recent years.
Can the Minister say anything about coastguard surveillance in the area? Suggestions for improvements have been made. That implies that there may be some deficiencies in the present arrangements. I do not say that in a critical spirit, but I should be grateful if the hon. Gentleman could deal with the matter.

Mr. Eyre: I can assure the right hon. Gentleman that the preliminary inquiry will be wide-ranging. I can assure him that the coastguards were fully active, as I made clear in my statement. They did all that they possibly could, in very difficult circumstances.
It has been suggested that the coastguard service at Wick should remain there but that part should be transferred to augment the coastguard service available at Kirkwall. I believe that that move is not yet ready. However, I hope that it will prove of assistance to the fishing industry.

Mr. Albert McQuarrie: It was my unfortunate duty to accompany my hon. Friend the Member for Banff (Mr. Myles) to the memorial services following the loss of the previous vessels to which he referred. As the "Celerity" was sailing to its home port of Peterhead, in my constituency, I share my hon. Friend's sorrow and that of the thousands of fishermen in and around my constituency. It is sad that the poor town of Buckie has had to suffer such a dreadful loss in the last few years.

Mr. J. Grimond: I should like to be associated with the regret that has been expressed, and to express sympathy with the families of the lost men. Does not this once again illustrate the extreme danger of fishing in the seas around Orkney and Shetland, and the cost in lives of bringing fish to this country? Since they have been mentioned, would it not be appropriate to pay a tribute to the work of the coastguards, which is carried out in all weathers and is vital to fishermen in the North of Scotland?

Mr. Eyre: I appreciate the right hon. Member's words of regret. I very much appreciate the tribute that he paid to the coastguards, who play a wonderful part in doing all they can to ensure safety in this area.

Mr. Bill Walker: Everyone in Scotland will be saddened by this additional loss and


will welcome the interest that the House is showing in this difficult area. Will my hon. Friend and his colleagues in Government look carefully at the facilities that are available for aerial surveillance and sea operations in the now busy waters of the North Sea? The waters are far busier than they have ever been, and the problems are mounting daily. The fishermen who must go out into those waters are facing not only the problems of the elements but the additional problems brought about by oil-related activities.

Mr. Eyre: I appreciate the points raised by my hon. Friend. I assure him that major improvements in the coastguard VHF radio coverage of the North Coast of Scotland have been introduced in the past two years. Search and rescue capability in that area has been strengthened by the establishment of RAF Sea King helicopters at Lossiemouth. Those helicopters were active yesterday in the search in the Pentland Firth.

Mr. Gordon Wilson: I associate myself and my right hon. Friend the Member for Western Isles (Mr. Stewart) with the expression of sympathy that the Minister will make on behalf of the House to the relatives of the deceased. It is on such occasions that those of us who do not have fishing constituencies realise the sacrifice made by those who go to sea in dangerous conditions to bring back the fish that form part of our livelihood.

Mr. Eyre: I am grateful to the hon. Gentleman for his words of sympathy.

Mr. Alex Pollock: I associate myself, on behalf of the neighbouring constituency of Moray and Nairn, with the expressions of sympathy already put forward by the House. The House will understand that the fishing community on the North-East Coast of Scotland is tightly knit, and that the loss to one port is a loss to them all. Will the Minister confirm that in this incident a significant part was played both by RAF Lossiemouth—to which he referred—and RAF Kinloss? They have performed a very great service to the community.

Mr. Eyre: I appreciate my hon. Friend's words and I confirm that the RAF services played a notable part in the search, in the way that I have described.

Business of the House

Mr. Denis Healey: Does the Leader of the House have a statement to make about the business for next week?

The Chancellor of the Duchy of Lancaster, Paymaster General and Leader of the House of Commons (Mr. Francis Pym): Yes, Sir. The business for next week will be as follows:
MONDAY 23 MARCH—Progress on remaining stages of the Local Government (Miscellaneous Provisions) (Scotland) Bill.
Motion relating to the National Health Service (Functions of Health Boards) (Scotland) Order.
TUESDAY 24 MARCH—Supply [13th Allotted Day]: Debate on an Opposition motion on overseas aid.
Remaining stages of the Merchant Shipping Bill [Lords] and on the International Organisations Bill [Lords].
At Seven o'clock, the Chairman of Ways and Means has named opposed private business for consideration.
WEDNESDAY 25 MARCH—Completion of remaining stages of the Local Government (Miscellaneous Provisions) (Scotland) Bill.
Second Reading of the Ports (Financial Assistance) Bill.
Motion on the Transport Boards (Adjustment of Payments) Order.
THURSDAY 26 MARCH—Debate on European Community documents 5091/81 and addendum l on CAP price proposals 1981–82, and on Documents 5191/81, 12271/80 and on the explanatory memorandum of 17 March 1981 on development of livestock production in Ireland.
Motions on the Enterprise Zones (Northern Ireland) Order and on the Northern Ireland Consolidation Orders on Planning Blight (Compensation) and Public Order.
FRIDAY 27 MARCH—Private Members' motions.
MONDAY 30 MARCH—Supply [14th Allotted Day]: Subject for debate to be announced.

Debate on European Community Documents relating to Agriculture

[The relevant reports of the European Legislation Committee are the Fourteenth and Fifteenth reports of Session 1980–81 (he 32-xiv and 32-xv, 1980–81). These reports are not yet published, but photocopied versions are available in the Vote Office.]

Mr. Healey: As widespread scepticism about the figuring in the public expenditure White Paper published last week has led the Financial Secretary to say that big additional cuts in public spending will be required if the Government are to be able to make cuts in income tax for electoral purposes, will the right hon. Gentleman assure us that we can have a debate on the public expenditure White Paper before we debate the Finance Bill? Will he assure the House that the whole Finance Bill will be taken on the Floor of the House, as it has broken every one of the Government's election promises and is universally agreed to have inflicted great damage on the British economy? Will the right hon. Gentleman tell us when he will be able to arrange the day's debate on race relations, which he promised us last week? In view of the uncertainties still abroad about the precise effect of the Budget on energy prices, will the Secretary of State make a comprehensive statement on Monday about the present position?

Mr. Pym: It is my intention to arrange a day for a debate on the public expenditure White Paper before Easter. I take note of the right hon. Gentleman's request that it should take place before the Second Reading of the Finance Bill. The precise timing is a matter for consideration through the usual channels.
It is our intention to proceed with the Finance Bill as the House has done for many years, with a number of days on the Floor for Committee and part of the Bill taken upstairs, and similarly, on Report, a number of days on the Floor of the House. That will be the right way to proceed.
I did not promise a day for race relations, but I took note of the matter and was aware of the great interest in the House. I expressed the view then—which I adhere to now—that it would be right for the searching inquiry put in hand by the police to be completed before we considered what we should do next.
I take note of the right hon. Gentleman's request on energy prices. I shall take an opportunity today or tomorrow to discuss that possibility with my right hon. Friend, but I would not like to give an undertaking to the right hon. Gentleman.

Mr. John Stokes: Will my right hon. Friend allow time for a debate on the proposed EEC passport, which is causing disquiet on both sides of the House?

Mr. Pym: It will be some time before any action is taken or any changes are brought about in relation to the passport. However, there will be plenty of time for a debate before that happens. I understand that it may be some years before action is taken.

Mr. Bob Cryer: Will the Leader of the House allow time for a debate on the report of the working party on the establishment of an independent element in the investigation of complaints against the police? The Home Secretary made it clear in a written answer yesterday that he would welcome comments on the report, which many of us think is wholly inadequate. It is a whitewash, and does not even meet the requirements of the terms of reference. Can we have a debate on it reasonably speedily, before it gathers dust and is forgotten?

Mr. Pym: I cannot help the hon. Gentleman in that request. However, it would be appropriate for him, or any other hon. Member, or anyone else, to make any comments that they felt motivated to make. After that we could consider the matter.

Several Hon. Members: rose—

Mr. Speaker: Order. I propose to call those hon. Members who have been rising in their places.

Mr. Michael Latham: Did my right hon. Friend hear the strong feelings expressed in questions by several Conservative Members earlier this afternoon about the civil servants' dispute—questions that were effectively replied to by the Prime Minister? Will he ensure that the House is kept fully informed, and that we may be assured that the Government are standing firm?

Mr. Pym: Yes, Sir. Naturally, the Government hope that the dispute can be brought to a reasonably early end. I take note of my hon. Friend's request, which is shared in other parts of the House, for the House to be kept informed of what happens.

Mr. Clement Freud: In view of the ongoing bottomless pit situation, will the House be given a budget on State aid to industry?

Mr. Pym: I think that one Budget this month is enough.

Mr. Sydney Chapman: Is my right hon. Friend aware that the second motion tabled for debate last Friday, standing in my name and entitled "Alternatives to the rating system", was not reached? Will he sympathetically consider finding time for a debate on that general issue? May I suggest that it might be politically prudent to do so before ratepayers receive their next rate demands?

Mr. Pym: I am sorry that there was not time for my hon. Friend's motion to be debated. I shall consider his request sympathetically but without a great deal of hope, because there are other ways in which these matters can be raised. However, I take note of his request.

Mr. David Winnick: Would it not be useful to debate the question whether it is an abuse of the electorate—indeed, of the House itself—for someone clearly elected as a candidate of a certain political party to resign from that party and yet not resign from the House? Is there not a case for changing the law to provide that someone who has resigned from his party would have to resign from the House to fight a by-election under his new colours?

Mr. Pym: That might make an interesting debate, but not in Government time.

Mr. Ivan Lawrence: Is my right hon. Friend aware that a certain amount of heat has arisen in recent exchanges about the Middle East? Will he give an assurance that there will be an early debate on the Middle East, so that more light, rather than more heat, can be shed?

Mr. Pym: I am still hoping to arrange a debate on foreign affairs either just before or just after Easter. My hon. Friend's subject of the Middle East would be appropriate for that debate.

Mr. Derek Foster: When can the House debate Northern region affairs? Is the Leader of the House aware that male unemployment in Bishop Auckland stands at 19 per cent., that it is 24 per cent. in Crook, and that in certain districts of Durham it has reached 30 per cent.? Is he further aware that all that the Government have done is to degrade parts of Durham and cut the amount of money available for regional aid by one-third?

Mr. Pym: I take on board the hon. Gentleman's concern about the Northern region. Everybody is concerned about the economic conditions and the unemployment in that area. I hope that there will be an opportunity for the House to debate that subject. Other regions have had their affairs debated, so it would be appropriate for Northern region affairs to be debated. However, regional debates are usually held in Supply time. As I do not wish to mislead the hon. Gentleman, I cannot give an undertaking that I can find time in the near future. However, I accept the importance of the subject.

Mr. Peter Bottomley: In the discussions in preparation for the debate on public expenditure, would it be possible to prepare for a more useful debate than usual by asking the Opposition and the Government to spell out certain effects on the volume of public services provided within a certain cash limit—especially the effect of the level of pay settlements? Would it be possible to invite the Leader of the Opposition to say, at the start of the debate, what should happen to nominal pay increases during the next two years?

Mr. Pym: I take note of that request. My hon. Friend may be right, but I am not sure whether, in practice, we should make much progress by following his suggestion.

International Computers Ltd.

The Secretary of State for Industry (Sir Keith Joseph): With your permission, Mr. Speaker, I wish to make a statement about International Computers Ltd.
The House will be aware that the Government are users on a substantial scale of ICL computers with equipment to a value of more than £300 million supporting vital operations in some 20 Departments including defence, revenue assessment and collection, agriculture, health and social security. Because of that dependence upon ICL's products we have therefore shared the concern expressed by the company's chairman at the annual general meeting on 3 February about the deterioration in its trading position. In reporting the results for the year to 30 September 1980 he indicated that there had been a sharp drop in profit in the second half of that year, that the company was currently trading at a loss and that adverse trading conditions could continue well into the current year. However, given a revival in markets, the chairman said that ICL expected a significant improvement in the profitability of its operations.
The trading position of the company is, of course, essentially for its management, its shareholders and its bankers, and it is to the banks that ICL looks primarily to maintain its credit facilities on a world-wide basis. However, the Government have a special interest in ICL as a substantial customer for its products. To protect that special interest we have, therefore, given a positive response to a proposal that the Government should provide a limited, temporary measure of support for ICL. That support, in addition to a contribution towards research and development which could be available under existing criteria, should give the company the chance to review its longer term business opportunities. I am glad to be able to say in that context that the company's principal banks are continuing their support for the company in an amount of £70 million.
I therefore intend to seek from the House, at the earliest opportunity, its authority to provide a guarantee for further faciltities to be provided by banks for ICL under section 8 of the Industry Act 1972. The terms I shall be proposing to the House will be for a guarantee of up to £200 million for a period of up to two years. Such a guarantee will not lead to any public expenditure unless it is called. I emphasise that it will be a limited amount and for a limited time.

Mr. John Garrett: Is the Secretary of State aware that we welcome the statement as far as it goes? It is always good to see Government intervention in industry, if only as a result of ad hoc pressures and under duress. Does the right hon. Gentleman agree with the chairman of ICL that the root causes of its difficulties are the high value of the pound on a company that exports half its output, the effect of interest rates on high borrowings, and the decline in domestic demand caused by the capital investment slump—all factors caused or worsened by the Government's economic policies? Does he agree that ICL has received less in State support, especially for research and development, than its competitors in other countries? Will he comment on ICL's request for assistance with research and development?
Does the right hon. Gentleman agree that it is now clear that the sale of ICL shares by the NEB on Government instructions was misguided because ICL is now back in the

position of being suitable for the NEB to take it over on the Government's criteria for rescues by the NEB? What does he mean by "a limited, temporary measure of support"? Is it true, as reported today, that Sperry Univac is waiting to pounce on ICL and buy it for only £80 million? Does he agree that that would be a disaster for high technology in Britain—an area in which we must have a substantial presence if we are to succeed? How is limited temporary support a substitute for a policy and a plan for information technology such as the French and Japanese have? Why must we lurch from one expedient to another in this as in every other area of industrial policy?

Sir Keith Joseph: ICL, has been subject to the same market and economic conditions as all other companies in Britain. In recent months there has been a sharp downturn in world demand for computers, especially large computers, and ICL has experienced the same downturn as many other computer companies. The record of Government intervention in Britain has not been so happy that the hon. Gentleman should praise it so highly. I do not apologise for the fact that the NEB, under the Government's general policy that it should dispose of its assets, disposed of its shares in ICL at a time when its profits and prospects were, as the market judged, very good. I have no comment to make on the reports in the newspapers to which the hon. Gentleman referred.

Mr. Peter Tapsell: My right hon. Friend said that the Government would usually expect ICI to look to the banks for support. Is he aware that as a consequence of the 15:1 ratio that the banks have to maintain between their capital and their advances, the effect of the £400 million windfall profits tax on the banks has been to reduce by £6 billion the amount of money that the commercial banks have available to lend to the private sectors of industry, business and agriculture? Is it really sensible to drive private enterprise industry deeper and deeper into the ground and then force it to come to the State for aid rather than to the commercial banking sector?

Sir Keith Joseph: The banks have to make a judgment about the amount of money that they will put into any company. In view of the sharp recession in world demand for large computers, they were entitled to make that judgment. I have no reason to believe that the general background to which my hon. Friend refers has anything to do with this case.

Mr. Richard Wainwright: The statement announces a wise move. Will the Secretary of State accept the congratulations from the Liberal Members on discarding rhetoric and coming to terms with business reality, especially in the sense that he has recognised that, while the banks, of their own accord, are supplying £70 million of support, the Government, quite correctly in our view, are offering £200 million of support? That is the proper proportion of support in this case. Does the Secretary of State realise that he has not put this operation into the context of industrial strategy? When will he allow the House to look into the huge pot of gold which the Prime Minister appears to have put at the disposal of his Department?

Sir Keith Joseph: The decision resulted from the dependence of many Government Departments upon the service provided by ICL. It would have been very expensive indeed for the taxpayer had that service come


under any doubt whatsoever. That is why in this special case the decision has been made. I remind the House and the hon. Gentleman that what the Government are providing is not equivalent to what the banks are providing. The Government are providing a guarantee that is unlikely to be called.

Mr. Tom Arnold: Does my right hon. Friend recognise that his decision will be widely welcomed throughout Manchester? Will he say whether the £200 million will form part of the public sector borrowing requirement immediately?

Sir Keith Joseph: No, the guarantee does not form part of the public sector borrowing until and unless any part of it is called.

Mr. Ian Wrigglesworth: Does the Secretary of State agree that this is further evidence that the Government are at last dropping some of the unnecessary ideological baggage that they brought into office? Is not this a typical example of the damage being done to British industry by successive Governments forcing retraction of public investment in industry and having to return a short time later to put back that public investment? Will he tell the House why the National Enterprise Board, as it was successful in bringing ICL round last time, has not been involved? Will he say what steps will be taken by the Government to ensure that ICL will be put back on the right tracks?

Sir Keith Joseph: I do not apologise in any way for believing that the less the Government and taxpayers are involved in the affairs of private business the better. The job of the Government is to create a framework. As we all know, there are nationalised industries and public agencies and, very occasionally, there are suppliers to the Government which the Government, in the interests of taxpayers, want to allow to continue to provide services that they are providing while that remains a sensible decision. I do not see that as an ideological transformation. We stick to our policy about the National Enterprise Board. The proper behaviour for the NEB is to dispose of its existing assets as practicable and to embark on new ones only in partnership with private enterprise.

Mr. Peter Emery: Does my right hon. Friend accept that many Conservative Members believe that he is correct about the necessity to keep major strategic British industries in being? Will he ensure that if at any time other strategic industries come to him he will use the same method, under section 8 of the Industry Act, of using guarantees rather than grants or Government loans to assist them?

Sir Keith Joseph: My hon. Friend seeks to tempt me upon a path that I do not find particularly inviting because there are many different interpretations of the word "strategic". I repeat that the decision was made on the basis that ICL is an important supplier to the Government. The consequences of anything other than a continued service, while that remains sensible, would be damaging to the taxpayers.

Mr. Robert Sheldon: Is the Secretary of State aware that ICL has recently constructed a major new building in Ashton-under-Lyne? Will he recall the powerful delegation that he saw, together with

me, some weeks ago which was concerned about the high level of unemployment in the Ashton-under-Lyne area? Will the two-year period be enough for this important company to be able to continue its plans and to introduce new ones for the years ahead?

Sir Keith Joseph: I well remember the delegation that the right hon. Gentleman brought. Yes, we are advised by the management and the banks that the two-year period will suffice.

Mr. David Crouch: Am I right in thinking that my right hon. Friend has acted like a good banker by issuing a guarantee in what is termed in banking circles a comfort letter? I am not against that, but does he realise that other comfort is required by industry, especially by ICL, and that is business and markets? Is he satisfied that the buying that he has referred to by Government Departments and nationalised industries is on a substantial enough scale? Will he consider giving direction to those Departments and nationalised industries to buy British from ICL to a greater degree?

Sir Keith Joseph: We have acted as an enlightened purchaser. It is part of the Government's policy that we should be enlightened purchasers, but I repeat that this is an exceptional case. The House will remember that the Government have placed a number of orders recently with ICL including one which much interested hon. Members. Within the past few days the company has obtained three major orders from leading companies in this country, France and Australia against heavy competition.

Dr. Jeremy Bray: Does the Secretary of State agree that, whatever his doctrinal position, ICL has been a case of successful public intervention and can prove to be so again? Is he aware that the original terms of support for the merger of ICT and English Electric Computers were based on the product design and specification for the 2900 range? It was against a technical and market plan that the original successful support was given. Is the Secretary of State therefore aware of the dangers of waltzing into a position where there are potentially very large investments going well beyond the two years without a national strategy on information technology generally?
Finally, are the £70 million worth of bank loans already available included in the £200 million now covered by the letter of comfort, or are they additional?

Sir Keith Joseph: There might be long debate about the summary and background that the hon. Gentleman has given to the original connection between ICL and the then Government. There is no doubt that ICL contains much talent and great resources. The sum of £70 million is the base on which the guarantee for £200 million is an addition.

Mr. Gwilym Roberts: Does the Secretary of State agree that the narrow point made by the Opposition Front Bench that, however welcome short-term support is, it is no substitution for coherent information technology strategy? Does he agree that most of our industrial competitors are developing such information technology strategy? Will he now follow up the wisdom of the appointment of the Minister for Industry and Information Technology with the development of such a coherent strategy?

Sir Keith Joseph: Inasmuch as the word "strategy" means the identification of obstacles to progress, I accept what the hon. Gentleman says. Inasmuch as "strategy" implies that the Government know better than individual businesses how best to satisfy customers at home and abroad, I hesitate about agreeing with what he said.

Several Hon. Members: rose—

Mr. Speaker Order.: I have called two hon. Members in succession from the Opposition Benches. I shall do the same in regard to the Government Benches.

Mr. Michael Grylls: Will my right hon. Friend accept that, if he is providing nothing more than a temporary safety net while a private sector rescue is mounted, obviously the taxpayer is not involved? However, may I warn my right hon. Friend in the strongest possible terms against going down the path that Labour took with British Leyland, in taking shares in the company, because that path proved to be totally disastrous?

Sir Keith Joseph: I heed what my hon. Friend says. We are not taking up any equity.

Mr. Richard Page: In view of the possibility of another huge drain on the public purse, may I urge my right hon. Friend to approach the board of ICL and ask its members urgently to undertake talks on possible mergers with other parts of the private sector?

Sir Keith Joseph: This is primarly a matter for the company, but I am sure that what my hon. Friend has said will be noted by it.

Mr. Tom Ellis: Does the right hon. Gentleman agree that, notwithstanding the difficulties referred to by the spokesman of the official Opposition—and they are serious difficulties—it would be extremely difficult for a generalised telemetrics company such as ICL successfully to prosecute its business on the basis of the market of a nineteenth century European State? Will he, therefore, enter into discussions with ICL and with his colleagues in the Community with a view to establishing an integrated telemetrics industry on a Community basis?

Sir Keith Joseph: I hesitate to encourage that ambitious thought. However, the hon. Gentleman surely realises that ICL has established many good markets abroad, which I am sure its management will try to hold.

Several Hon. Members: rose—

Mr. Speaker: Order I shall call four hon. Members from the Government Benches—and that, I think, will be a very good run.

Mr. Nigel Forman: Is my right hon. Friend aware that his statements of guarantee today on behalf of the Government will be widely welcomed by all those who are concerned for the long-term industrial future of this country? Will he confirm, now or later, that one of the effects of his very welcome statement will be to make more secure than would otherwise have been the case quite a large number of jobs in the more forward-looking parts of British industry?

Sir Keith Joseph: That depends upon market conditions and the performance of the company.

Mr. Ian Lloyd: While it is obviously essential that a firm which is recognised as the flag carrier in this area in this country should both survive and thrive, may I ask whether my hon. Friend is aware that there is a widely held view among the cognoscenti in this very difficult sphere that a firm of the size of ICL is unlikely ever to thrive if it attempts to compete right across the board, including the very largest mainframe computers, and that unless a major decision on this subject is made and faced by the Government and ICL, it will probably come back to the House again and again?

Sir Keith Joseph: I am sure that the management will be reflecting upon the options open to it and will be aware of what my hon. Friend says.

Mr. Kenneth Carlisle: I recognise that it is important for us to retain our own computer industry in Britain if at all possible, but how can we be certain that the guarantee given will be temporary and limited? History has shown us that once we get embroiled in these matters more and more Government and public funds become committed.

Sir Keith Joseph: I think that all of us on the Conservative Benches are very well aware of the dangers. The guarantee lapses after two years.

Mr. John Browne: My right hon. Friend said that the industry is very competitive. I entirely agree with that. However, I hope that he will agree that it is also a booming industry, particularly in home computers and in software, and that the latter subject is particularly a British strength. Does not the fact that ICL has now had to turn to the Government for a guarantee to enable it to borrow from the banks throw a major question mark over the management of ICL? Will my right hon. Friend please comment upon that, and upon whether he proposes to impose one or two directors on the board of ICL, as was very successfully done before the war in relation to British Petroleum?

Sir Keith Joseph: The Government and the banks will naturally keep a close watch on the company's performance throughout the duration of the guarantee. The size of the ICL operation naturally requires a strong board of management.

Royal Assent

Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Consolidated Fund Act 1981
2. Redundancy Fund Act 1981
3. Industry Act 1981
4. Gas Levy Act 1981
5. House of Commons Members' Fund and Parliamentary Pensions Act 1981
6. European Assembly Elections Act 1981

BILL PRESENTED

DISABLED PERSONS (No. 2)

Mr. Dafydd Wigley, supported by Mr. Jack Ashley, Mr. Lewis Carter-Jones, Mr. Alfred Dubs, Mr. Bob Dunn, Mr. Clement Freud, Mr. John Hannam, Mr. John Heddle, Mr. Alfred Morris, Sir David Price, Mr. D. E. Thomas, and Mr. Gordon Wilson presented Bill to impose on highway authorities and other persons executing or proposing to execute works on highways a duty to have regard to the needs of disabled persons; to increase the penalty for certain offences under the Road Traffic Regulation Act 1967 where those offences are committed by persons who improperly seek to avail themselves of certain parking facilities provided for disabled persons by orders under that Act; to impose a duty on planning authorities to draw the attention of persons to whom they grant planning permission to certain statutory and other provisions relating to access for disabled persons to buildings and other premises used by the public; to make further provision for the display of signs giving information as to such access; to require the Secretary of State to lay before Parliament a report as to proposals for ensuring or facilitating the improvement of means of access to such buildings and premises; and for connected purposes: And the same was read the First' time; and ordered to be read a Second time tomorrow and to be printed [Bill 97].

Orders of the Day — Iron and Steel Bill

Order for Second Reading read.

The Secretary of State for Industry (Sir Keith Joseph): I beg to move, That the Bill be now read a Second time.
The Bill has two main purposes. First, by removing the British Steel Corporation's duty to supply iron and steel products it removes any limitations that may exist to the privatisation of BSC activities. This provision—the removal of the duty to supply iron and steel products—will also enable BSC to withdraw from activities on which a profit cannot be made, if this should prove necessary. Secondly, the Bill recognises the financial consequences of past mistakes and losses by writing £3,500 million off the corporation's capital immediately. This is taxpayers' money which can never be recovered.
The Bill provides essential backing to the BSC corporate plan. A report on the plan by the corporation was placed in the Library and in the Vote Office on 24 February, on the same day that I made a statement about the steel industry and the Government's response to the corporate plan. The British Steel Corporation's prime aim, as set out in the plan, is to become internationally competitive. It aims to regain its pre-strike domestic market share of 54 per cent. It aims also to increase its exports over the low levels of recent years. By this action it plans to ensure that its remaining manned capacity at 14·4 million tonnes annually is profitably used.
The substantial reductions in personnel, which have meant that 50,000 jobs were shed in 1980, will have to continue, and it is estimated that a further 20,000 jobs in the corporation will disappear this year. This reduction will be achieved by improving efficiency, but further closures will also be necessary.
BSC also aims to reduce energy costs, which account for about 20 per cent. of total costs, by improved energy usage. In addition, the arrangements for introducing new flexibility into the pricing arrangements of the electricity supply industry in England and Wales, as announced by my right hon. and learned Friend in his Budget Statement last week, will also help reduce the corporation's energy costs.
Capital investment will be restricted to the completion of schemes in progress and essential new items. The corporation's interest burden will be reduced, as I shall explain a little later.
As I said in my statement on 24 February, Mr. MacGregor has described the plan as optimistic. He is right for several reasons, but chiefly because what happens depends to a large degree on factors outside the control of BSC. Effective steel capacity in the EEC has exceeded production by some 40 to 50 million tonnes per year since 1975, and it is unlikely that there will be any sudden or significant improvement in capacity utilisation in Europe as a whole. Excess capacity has kept European steel prices generally at levels below those of 1978–79. BSC has had to respond to this competition, despite inflationary pressures at home. There is no prospect of dramatic improvement in European prices. The strength of sterling,


particularly against the deutschemark and the yen, has put the United Kingdom steel industry at a competitive disadvantage.
Forecasts for 1981–82 are that steel demand in the United Kingdom will fall by 5 per cent., as compared with 1980–81, to 12·5 million tonnes, with a modest degree of recovery thereafter. These adverse trading conditions and the history of massive losses over recent years make it essential for both the corporation and the Government to monitor closely the progress made in achieving the targets set in the plan. Mr. MacGregor will give us his assessment of progress by July. If the plan fails, the corporation may not be able to survive in its present form. Further closures and redundancies may be necessary, perhaps on a large scale. That is why the Bill removes the duty on the corporation to supply iron and steel products, thus enabling it to withdraw—if necessary—from sectors of steel production, and to effect an extensive rundown of its operations.
The removal of the duty to supply iron and steel products will also facilitate the transfer of the BSC's businesses to the private sector. This will be an important way of optimising the survival of production and jobs in the steel industry in this country, particularly where there is competition between the private and public sectors.
I welcome the recent announcement by the BSC and Guest Keen and Nettlefolds of an agreement in principle to combine their rod and associated businesses in a new company, Allied Steel and Wire Limited. I hope to receive further agreed proposals for other public sector/private sector joint companies in the other steel making sectors where there is an overlap of operations.
Because of the need to ensure that the corporation competes fairly with those private sector companies, Mr. MacGregor has agreed to consider placing those corporation businesses that are in competition with the private sector in separate Companies Act companies. This will serve to make the corporation's activities more transparent and will also pave the way for further privatisation, which the Bill permits. In addition, as I announced on 24 February, Mr. MacGregor has undertaken personally to investigate any specific allegations of unfair pricing that are put to him by companies or by hon. Members. My hon. Friend the Under-Secretary is monitoring these complaints and keeping me informed of developments.
The modification of the BSC's function is effected by clause 1. This clause has three main parts. Subsection (2) repeals section 2 of the Iron and Steel Act 1975, which imposes general duties upon the corporation and on the publicly owned companies. The corporation will, therefore, no longer have the main duty to promote the efficient supply of iron and steel products or to ensure that the reasonable demands of United Kingdom manufacturers are met. A number of its subsidiary duties will also disappear, such as the duty to promote exports and to promote research and development.
The second substantive part of the clause, subsection (3), modifies section 3 of the 1975 Act, which confers upon the corporation its powers to carry on iron and steel activities, to sell iron and steel products and to carry on certain other activities. This modification will ensure that the corporation retains the legal power to carry on its existing functions, but will also provide that it can carry on its activities through companies in which there is private sector investment. The overall effect of

subsections (2) and (3) is threefold. They will facilitate the formation by the corporation of companies to carry on iron and steel activities and non-iron and steel activities, and the holding of shares in companies which carry on such activities. They will enable the corporation to carry on no activities, but merely to procure other companies in which it holds shares to carry them on. Lastly, they will enable the corporation to dispose of its property so as to extinguish public ownership of companies envisaged by the Iron and Steel Act 1975 and to reduce the undertaking of the corporation to minimal proportions.
The third substantive part of the clause, subsection (4), amends section 4(5) of the 1975 Act so as to enable the Secretary of State by order subject to negative resolution of either House to direct the corporation to discontinue or to restrict any of its activities or to dispose of any of its property. These cover iron and steel activities, whereas they were available formerly only in respect of non-iron and steel activities. They are intended only as reserve powers.
I turn now to the second purpose of the Bill, which is to effect a reconstruction of the corporation's finances. As I said earlir, this part of the Bill writes off the financial consequences of an over-ambitious investment programme in the early 1970s which was entirely inappropriate—seen in hindsight—to the level of demand later in the decade, and also a consequence of the delay in allowing the corporation to adjust its capacity to the lower level of demand. The corporation was thus left with investments, some of them in modern equipment, that had no potential value in the foreseeable market conditions. This has compounded the losses suffered by the corporation—in common with most European steel makers—in recent years. In addition, the corporation has been forced over the past year rapidly to adjust its capacity to the market realities, instead of being allowed gradually to contract.

Mr. Frank Hooley: The right hon. Gentleman seems to be trying to argue that the process was somehow inevitable. Is the right hon. Gentleman aware that European countries such as Spain and Italy have substantially increased their capacity and output? No other country has slashed capacity in this way.

Sir Keith Joseph: Most of Western Europe has experienced large losses. There can be no doubt that the nationalisation and renationalisation of steel was a tragic disaster for the industry.
The investments written off, the generous payments to redundant steel workers and the loss incurred through inefficient operations in the past can never be recovered. The Bill will immediately recognise the cost to the country by writing off £3,500 million from the BSC's capital.
The immediate write-off is effected by clauses 2 and 3 of the Bill. Clause 2 writes off the liability of the corporation in respect of the remaining borrowings from national loan fund, amounting to £509 million. This will provide the corporation with an immediate relief from interest in 1981–82 of £59 million. The corporation's long-term interest burden will, therefore, be reduced from £119 million to £60 million in 1981–82. This latter figure will be interest payable on £622 million of foreign borrowing, which will remain on the BSC's balance sheet.
Clause 3, by virtue of subsections (2) and (3), writes off £3,000 million of the capital invested in the corporation


under section 18 of the 1975 Act. When this immediate write-off has taken place there will remain about £1,800 million capital on the BSC's balance sheet. These provisions do not represent the commitment of additional funds, they simply recognise that the large sums invested by the taxpayer in the BSC in the past—or a very large part of those sums—are now worthless.
The remainder of clause 3 makes provision for a further write-off before the end of 1982 of up to £1,000 million of capital subscribed under section 18, by order subject to affirmative resolution. When viability is in sight it will be possible to assess more accurately the economic size and potential earning power of the corporation, and to make further adjustments to the capital structure, if that seems appropriate. At this juncture it is impossible to say whether any further write-off will be required, and if so what its size—within the £1,000 million limit—should be.
Clause 4 seeks to reduce the BSC's borrowing limit under section 19 of the 1975 Act to £3,500 million. It will be possible, by order subject to affirmative resolution, to increase this amount to not more than £4,500 million or to adjust it to a figure between £2,500 million and £4,500 million if a further write-off of capital is effected, as permitted under clause 3. The provision relating to the borrowing limit will supersede the borrowing limit of £6,000 million set by the Iron and Steel (Borrowing Powers) Act 1981, which will be repealed by an amendment to be inserted into this Bill. That Act, which was an interim measure to allow the corporation to be financed during the passage of this Bill, would have allowed BSC to acquire £4 billion sterling additional borrowing without reference to Parliament. After the write-off of £3,509 million capital as provided by this Bill, the new £3,500 million limit will allow BSC to acquire £1,500 million further borrowing without further reference to Parliament.
I have tried to explain the substance of the Bill. By all normal commercial standards the corporation is bankrupt. Under present legislation it cannot be liquidated. This Bill will allow the corporation's activities to be reduced virtually to nil but we have stopped short of introducing a measure to provide for complete liquidation of the corporation. We do not think it appropriate at this stage to take such powers but we do not rule out the possibility of introducing further legislation to wind up the corporation if it becomes necessary. However, we have preferred at this stage to adopt a more positive approach.

Mr. Michael Grylls: If my right hon. Friend is saying that he actually needs further legislation to bring about the liquidation of the corporation in the sad event that the MacGregor plan does not succeed, why does he not put it in his Bill? It does not have to be used, but it would at least convince people outside that we do mean business and that Mr. MacGregor means business when he says to the corporation "This is your last chance."

Sir Keith Joseph: I do not think that people outside have much doubt that we mean business. I really do not think that much scepticism could be found about that among those who work for the British Steel Corporation.
This Bill will enable the British Steel Corporation to run down its activities virtually to nil and to remain involved in the provision of iron and steel inasmuch as it does so through partnerships with the private sector. I am

explaining to the House that we thought that went far enough and I am simply emphasising that if the residual British Steel Corporation seemed no longer to have justification we should be ready to seek further legislation to wind up the corporation.
I repeat that we have preferred at this stage to adopt a more positive approach. Whilst recognising the possibility that the corporation might need to contract further, and I have emphasised that in what I have said, we have demonstrated our support by providing for financial reconstruction which will enable the corporation to pursue its ambitious plan unencumbered by past debt and with a lighter interest burden.

Mr. Peter Emery: I thank my right hon. Friend for giving way. I thought perhaps he would cover my point and therefore I did not interrupt earlier. Does my right hon. Friend realise that when he presented the corporate plan to the House there was talk of the requirement over the next two years of £730 million extra cash for the British Steel Corporation? That was described as an optimistic figure. My right hon. Friend refused to give me the pessimistic figure that might be necessary. Does he realise that Mr. MacGregor gave to the Select Committee of the House yesterday the figure that might be necessary in the event of a pessimistic factor—namely a financial requirement of £1,192 million, which is nearly 50 per cent. greater than the optimistic figure which was put forward by the Secretary of State? Ought not the Secretary of State, in presenting this Bill, to take that situation into account?

Sir Keith Joseph: I should like to study what Mr. MacGregor said yesterday. I ask my hon. Friend and the House to accept, that without defending the figures we are using, there can be great confusion. One set of figures may included provision for interest and amortisation but not, for instance, provision for capital expenditure, closure costs and redundancy costs. It may be that the difference can be explained in that way.

Mr. D. N. Campbell-Savours: Would not the right hon. Gentleman accept that much of this confusion would have been avoided if the Secretary of State had put it to Mr. MacGregor that the corporate plan should be published in its entirety? Much of the confusion that arises stems from the fact that we have not had access to much of the information which was given yesterday, in very curious circumstances, in that Committee. Following Mr. MacGregor's statement yesterday, there is more need than ever before to ensure that the information in the corporate plan is made available to Members. It is possible also that those hon. Members who are on the Committee that reviews this Bill may find that they are speaking in a vacuum because information is only available, as I understand it, to members of the Select Committee who go to the Clerk of the Select Committee on Trade and Industry and ask to look at a document which is not available to other hon. Members of the House of Commons. I must say that I find that situation objectionable.

Sir Keith Joseph: It would surely be very damaging to nationalised industries, which already have enough problems anyway, to expose their plans to their competitors I think that our overseas competitors would welcome the publication of the full plan, so I do not think that would be very sensible.
In the light of the explanation I have given, I commend the Bill to the House.

Mr. Stanley Orme: This is a Bill of major importance and we must be thankful that, as the Secretary of State has said, at least he is taking a positive approach to the steel industry, rather than introducing a Bill that would damage it even further.
I think that in this debate we must take into account what my hon. Friend the Member for Workington (Mr. Campbell-Savours) has just said about the evidence given to the Select Committee yesterday. I want to come a little later to a point that the hon. Member for Honiton (Mr. Emery) raised with Mr. MacGregor in the Select Committee yesterday, because the meetings of the Select Committee coincide with the passage of the Bill through the House. As the Secretary of State knows, reference to evidence given in private session is not permissible, but reference is permissible when the evidence is given in public session, and I was present to hear the close cross-examination of Mr. MacGregor, certainly yesterday, by the Select Committee.
We must look at the Bill in the context of what is happening in the steel industry and in the economy as a whole. Whether or not our steel industry will survive and prosper will depend upon the context in which it operates. That context is created to a very large extent, although not exclusively, by the Government. Therefore, the current economic situation and the Budget must be taken into account when we consider the future of the steel industry as a whole.
Dealing with the reduction in the MLR and the state of the pound, Mr. MacGregor told the Select Committee yesterday that if he could have the pound at $1·50 he could solve the problems of the Steel Corporation. That rate might not be popular with some sections of industry, but that was the context in which Mr. MacGregor made the remark, and the point that he was making was that the burden that he was having to carry because of the high rate of the pound and the exchange rate was crippling British industry, and not least British Steel. That has to be made very clear indeed.
Whatever sacrifices steel workers make—and they have made many—and however good management may be, unless the Government give them a chance they are lost. It is against that background that we must examine the Bill. In Standing Committee we shall want to go into some of the financial details in greater detail, and later on my hon. Friend the Member for Whitehaven (Dr. Cunningham) will raise some of these matters. No doubt The Minister of State will attempt to reply tonight to some of the questions that I shall put to the Secretary of State but if that is not possible I understand that they can be dealt with in Committee.
We must do all that we can to support this major British industry, which is at the centre of our manufacturing community. Broadly, we support the financial provisions, although we regret that the proposals were not before us earlier. We oppose the clauses that are based on doctrinal prejudice against nationalised industries. I know that it is futile to attempt to persuade the Secretary of State to look with favour on these industries, so I shall focus on some of the practical implications of his proposals. The Secretary of State, who is doctrinally opposed to the public sector, is forced by the reality of life continually to support

the public sector, as he has done with the BSC, BL and ICL. We welcome that. These are crucial industries if we are to survive as a major industrial nation, and we can ill afford to do without them.

Mr. Hooley: Is my right hon. Friend aware that the Treasury is creating its own poverty trap? The more Treasury policies bite, the more money has to be poured into social security and unemployment payments. The more the policies bite on the industrial side, the more millions of pounds of public money have to be poured into the BSC, BL, ICL and so on. If only the Government would reverse their basic policies they would improve the affairs of the nation and their administration of them.

Mr. Orme: I accept what my hon. Friend says. He is saying that the Government have no industrial strategy. The Secretary of State is being forced by one disaster after another to take remedial action to assist industry, but he does not have an overall industrial strategy. The tragedy is that the Secretary of State, who puts money into these industries to save them and to prevent unemployment, does too little too late, and against the overall interest of the nation.
The Secretary of State said that he could not support worthless assets; that these worthless assets in the steel industry must go to the wall. What are these worthless assets? Is the right hon. Gentleman talking about Port Talbot, Llanwern or Redcar? A great deal of public investment has been put into these modern plants, and they produce the goods, yet he is saying that they are worthless assets. I believe that they are priceless assets of the nation. When there is an upturn in industry, there will be a shortfall of capacity and we shall have to depend upon imports rather than producing our own wealth. That aspect has to be taken seriously into account.
The Bill removes the general duties of the BSC to supply iron and steel products and modifies the powers of the corporation. These are the aspects that cause us grave concern. The Bill is not breaking a monopoly; it is breaking the back of the BSC by taking away its exclusive right in many areas to produce as a publicly owned company.
I give credit to the Secretary of State. He has not hidden his desire. He said very fairly again today that his desire was to see the industry move away from the public into the private sector. There is a complete division between us on this issue. We want to reaffirm our belief that a publicly owned British Steel Corporation is still essential to the manufacturing base within our society.
The grounds have been prepared for the denationalisation of the BSC. In October the corporation began to decentralise management authority to semi-independent businesses within the corporation. The purpose is not necessarily to denationalise, but the Government must have seen their opportunity, and the Secretary of State has been very honest with the House this afternoon.

Mr. Archie Hamilton: Does the right hon. Gentleman not agree that decentralisation improves management?

Mr. Orme: I take the hon. Gentleman's point, which is a fair one. That is happening with BL. I am not wedded to the Morrisonian concept that in a publicly owned company there must be a national board for the whole


industry and that that structure is rigid and must be retained. I am not saying that. We have to look at the structure of publicly owned industry.
The Secretary of State sees the Bill as a means of hiving off sectors of the BSC. We accept that there may have to be managerial changes. Sir Michael Edwardes is forming four units of production in BL, but he wants the company to remain under the overall control of BL. We want the management structure of the BSC to remain under the overall control of a publicly owned company.
The Secretary of State made it clear that he sees this change as an opportunity to adopt the policies that he wants to adopt. If an integrated organisation is broken up and the head of each sector is given autonomy, the industry can more easily be sold off bit by bit when the economy improves and when people are in a position to buy it. When an industry becomes profitable and the investment of public money begins to bear fruit it is a tragedy that it should be sold, so that the taxpayer does not get a return on his investment.

The Minister of State, Department of Industry (Mr. Norman Tebbit): The right hon. Gentleman is misunderstanding the position. The taxpayer does not throw away the money from the sale when he receives it. He invests it in hospitals, roads, schools and so on, which could not be done by any other person in the community.

Mr. Orme: I am willing to discuss this with the Minister. What the taxpayer gets back is a once-and-for-all payment for the asset, whether or not he invests it. If that asset is owned by the State, and, if year after year it produces a profit, the taxpayer gets a long-term benefit from the investment.

Mr. Bill Homewood: Much of the Government's expenditure is not on capital projects. At the moment most of it goes on unemployment costs.

Mr. Orme: I accept what my hon. Friend says. One could develop the argument about how that affects the public sector borrowing requirement and other aspects. It is worth repeating that it is the Government's intention and the Secretary of State's wish to see the British Steel Corporation broken up and sold to the private sector. If that is not successful, and if the industry falters, we shall be dependent upon imports.

Mr. Martin Flannery: Does my right hon. Friend remember that during Sir Monty Finniston's time, when one of the present senior Ministers was in charge, I did a programme on this on BBC 2? The Brymbo steelworks in North Wales were bought by us for about £43 million. About £8 million was spent on necessary modernisation, and the works were eventually sold back by the Conservatives for about £23 million—less than half of the amount spent on buying them. No matter how much we welcome the money for the BSC, if that is what is to happen under the Bill it should be deplored, because it means that public moneys will go to private enterprise for private use.

Mr. Orme: I take my hon. Friend's point. He gives a valid illustration of what happened in the past, and of what may happen in the future. We do not know what the value of assets will be if the Secretary of State decides to break up the corporation and sell off the various sections. We

know that that is the Government's intention. There is no secret about that. The Prime Minister herself has declared that the idea of making the corporation profitable is to denationalise it at the appropriate time.
This raises an interesting point, which Conservative Members should bear in mind. It is said that all public money to be allocated to the BSC under the Bill is being given to the corporation, but if those vast sums are being spent with the ultimate objective of selling off parts of the corporation to private interests it will be those private interests and not the British people who will benefit from the taxpayers' money. Conservative Members who support the £6·5 billion input in the writing-off of assets and so on should consider this. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) mockingly puts a gun to his head, but he is supporting it. He will not vote against it tonight, and he knows that the Bill will go through. Conservative Members should take that aspect into account.
I ask the Secretary of State to say to what extent Mr. MacGregor is under pressure from him and from the Government to dispose of good assets from the public to the private sector. Is it true, as was reported in The Times on 10 March, that Mr. MacGregor
is considering establishing Companies Act companies to run the Stanton and Staveley pipemaking grouping and British Steel Service Centres".
We should like an answer to that question. No doubt the Minister of State, who is well versed in these matters, will give us a reply later. I understand that Mr. MacGregor's evidence to the Select Committee indicated that that was the case.
I twin to the Phoenix arrangements with the private sector and the public sector. There is a problem in this for many workers in the public sector who may be moved as a result of the new privatisation and amalgamation arrangements between the public and the private sector. As the Government know, employees of the BSC have an inflation-proofed pension scheme. Will that be protected if they are transferred to the private sector? I know that the Minister of State will be delighted to answer that question.
Is the public interest served by the BSC-GKN arrangements? The House has no information. How can we know? The lack of information has been mentioned already. We have not seen the corporate plan, for instance. We do not know the details of Phœnix II and III. The information has not been given to us. We have to wait for press statements from the Department or from the BSC. I do not accept that purely commercial considerations are involved, because Mr. MacGregor told us yesterday that he is having great difficulty negotiating, not least with the private sector, about the proposed amalgamations.

Mr. Stan Crowther: Having seen the corporate plan, as I am a member of the Select Committee, I assure my right hon. Friend that it would not have told him anything about the matters that he is raising.

Mr. Orme: If that is so, it is an interesting proposition. The Secretary of State might care to put a copy in the Library tomorrow so that we may judge for ourselves.
I turn to another important factor. The Secretary of State will appreciate that we are here dealing with the private as well as the public sector in steel making. I wish to make clear the Opposition's standpoint with regard to the private sector. The arguments about the long-term arrangements were put to Mr. MacGregor yesterday in the


Select Committee. He was asked whether this was leading to an amalgamation of public and private sector firms which could then be denationalised, or whether the reverse might apply so that this could lead to more public ownership of private firms. I think that that sums up the two points of view put to Mr. MacGregor in the Select Committee.
The position of the Opposition is very clear indeed. Our main priority at present is to save jobs equally in both the private and public sectors. We are not arguing about what is better or what are the long-term objectives. Our concern is to save jobs. During the past week or two I have been able to look at some of the problems facing the private sector. I visited the Firth Brown company in Sheffield. As my right hon. Friend the Member for Llanelli (Mr. Davies) knows, only this week I met the workers from Duport when they came here to lobby Members. No doubt the Secretary of State and his Ministers are aware of the problems in the South Wales valleys.
In Sheffield, in South Wales and in other areas there is concern that firms with an international reputation will go to the wall. It is not just a question of unfair competition from the BSC. Not the least important of the issues involved is that of energy costs, to which I shall turn in a moment. The Bill means that assistance can be given to firms in the private sector. I refer the Secretary of State to clause 1(3)(c), which provides that
there shall be added the words 'and may, instead of themselves carrying on any iron and steel or other activities, promote the carrying on of any of those activities to such extent as they think fit by other persons none of whom need be a publicly-owned company'". 
Those powers are given in the Bill.
Certain firms under Phoenix II will be protected. Will the Secretary of State tell us tonight what will be done to assist the firm of Duport in Llanelli? We feel that there is a justifiable case for State support being given to ensure that that company remains in being and that there are not wholesale redundancies in an area of high unemployment, as my right hon. Friend the Member for Llanelli can verify. Having met the workers there, I believe that their plea for assistance is justified, and we support that call.
The Secretary of State said that he was concerned about energy costs. The Budget also refers to energy costs. When I visit steel plants, I am told that energy costs are of paramount importance. The report of the energy task force implies that 50 per cent. of electricity and 85 per cent. of gas is taken by less than 5 per cent. of industrial consumers. The figures for 1979, which are the latest available, show iron and steel as the largest industrial consumers.
The concessions in the Budget do only the minimum to sustain the steel industry. They do nothing to reflect the needs of major industries that depend heavily on energy and will not offset the devastation in the economy created by Government policies. That devastation is underlined by heavy energy costs. The BSC or Firth Brown in Sheffield will get little help from the Budget.

Mr. Grylls: I presume that the right hon. Gentleman is thinking particularly of electricity for the steel industry. France has encouraged the use of nuclear energy for electricity production and now has a great advantage over the remainder of Europe. Is the right hon. Gentleman in favour of speeding up our nuclear policy to give us that advantage?

Mr. Orme: That is an interesting question. I do not oppose a nuclear element in electricity generation. Irrespective of the source—coal-fired, oil-fired or nuclear generated—the steel industry should have a tariff reduction at source, as we have stated previously. That is of prime importance. The private sector tells me that energy costs are a bigger worry than competition from the BSC.
Turning to imports and the EEC, the Secretary of State or another Minister will be attending an important meeting later this month. The BSC has achieved about a 52 per cent. share of the domestic market—almost the corporate plan target. That achievement is in jeopardy unless the Government take steps to expand the economy.
On 24 February the Secretary of State said:
We intend to ensure that reductions in capacity are equitably shared among the members of the Community".;[Official Report,24 February 1981; Vol. 999, c. 747.]
That is of fundamental importance. The matter was discussed at the Council of Ministers on 3 March. The meeting was adjourned to 26 March. The Government must make the point that we have slimmed down our steel industry to a greater extent than has any other member of the ECSC.
As the Secretary of State said, the BSC lost 50,000 jobs last year. In 1981, under the corporate plan 20,000 more will go. It is not easy to get the figures, but, on an accurate assessment, over 10,000 jobs have been lost in the private sector of the industry, and the Secretary of State has told us that further closures and redundancies may be necessary.
We are bearing an unfair share of the burden of overcapacity within the Community. Will the Government assure us that they will fight our corner? On every issue in the EEC we play cricket, while our opponents do not. We are disadvantaged in so many areas. Whether or not we support the Common Market, it is time to say that enough is enough. Britain wants her fair share.

Mr. Tebbit: I am glad to tell the right hon. Gentleman that on 3 March I told the other EEC Ministers most strongly that we were continuing to slim down our industry. We expect other countries that are subsidising their industries to do the same. The right hon. Gentleman need never accuse me of being soft with our opponents.

Mr. Orme: I welcome that statement. I hope that when the Minister goes to Brussels in the near future he will feel that his argument is strengthened by the views on both sides of the House.
I noted Mr. MacGregor's words in the Select Committee yesterday:
Work for the night cometh." 
They were directed at those who work in the BSC. We all want the BSC to survive and jobs to be maintained. We make no distinction between the private and public sectors. Mr. MacGregor's words meant that if the plan was not workable we should face the consequences. However, he is not taking work people into his confidence. He appears to be running a one-man band. The Steel Board is of no value. I do not know what it does. I doubt whether even members of the Select Committee have seen the corporate plan. The board has not.
We want to see the corporation survive and prosper, but Mr. MacGregor cannot achieve that by diktat. He must have co-operation. The damage done by the strike has not healed. It will be difficult to heal the damage, when he is making 20,000 more people redundant this year.
Mr. MacGregor was asked by the hon. Member for Honition what other proposals he had if things got difficult. He replied that he had personal proposals. When the hon. Member for Honiton said that the Committee was entitled to know those proposals if the targets had not been met, Mr. MacGregor said that at the moment they were locked away in his mind and that he was not prepared to disclose them. That is not the way to get the co-operation of the work people.
I make an appeal to Mr. MacGregor to adopt a fresh approach to the workers, both the staff unions and the manual workers, to try and achieve an understanding so that they are fully conversant with what is happening. I hope that Mr. MacGregor is prepared to show that he is not simply a one-man band and that he is prepared to work for a situation in which the British Steel Corporation will prosper. I hope that the Secretary of State will also take on board this important point.
The Opposition will not vote against the Bill. We have been pressing for the financial proposals for some time. We shall, however, continue to oppose those parts of the Bill that undermine the future of the British Steel Corporation. Our objective is to see a thriving British Steel Corporation and a thriving steel industry in the United Kingdom. That is essential. Without that major industrial base we cannot be independent as a major trading nation. We are playing for high stakes. No doubt many of the points that I have raised will be pursued in Committee. I give the assurance that we shall not rest until we see the British steel industry once more viable and, we hope, profitable, in the interests of the British economy and the British people.

Mr. Michael Grylls: A large part of the speech of the right hon. Member for Salford, West (Mr. Orme) touched chords that find a response througout the House in relation to the great concern felt about the future of the steel industry. I agree with my right hon. Friend the Secretary of State, who, in answering questions on his statement today, defined the word "strategic" as representing dangerous and rather boggy ground. Of course, the steel industry is essential to a manufacturing country. I listened, almost with amusement, when the right hon. Member for Salford, West was winding himself up increasingly into a fury about the measures of denationalisation. Clearly, his speech could not be entirely partisan. That would not have worked at all.
The right hon. Member for Salford, West let a little light into the hearts of Government Back Benchers who otherwise might have been assumed by my right hon. Friend the Secretary of State to be a rather gloomy set of people in view of the figures to which reference has been made. The right hon. Gentleman had to take to task my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who was about to shoot himself thinking of the size of the figures involved in the Bill. Part of the approach is partisan and part reflects the different policy that would have been followed by the right hon. Gentleman if he was Secretary of State introducing a Bill in which the figures would probably be roughly of the same size. We can take some comfort from that situation.
My right hon. Friend the Secretary of State was not as forthcoming as some of us might have liked on the

question of ultimate liquidation if the MacGregor plan does not succeed. I accept that the Bill goes a long way to take away the duty from the Government to provide money for the BSC. The fact that Mr. MacGregor himself asked for this power was a clear signal to the BSC, and perhaps to everyone else, including hon. Members that if the plan did not succeed it would be the end of the road. Something would have to happen. Either a receiver would have to go in or there would be liquidation. That would not necessarily mean the end of steel making. If receivership took place, steel making would be divided up. The good bits would be preserved, but the others might have to go. It is a pity that my right hon. Friend has not gone further and taken this ultimate power. He may not be surprised if, in Committee, some of us table an amendment to toughen up those powers.
The taxpayer will have to accept the Bill today because the House is not to divide. Perhaps that is right. I believe that we should tell the taxpayer that if this proposal does not work we have the best man in the world to run British Steel. We have some wonderful plant. I believe that the right hon. Member for Salford, West was unfair in his remarks about Mr. MacGregor and consultation. My information is that since taking over last June Mr. MacGregor has tried supremely to carry out a great deal of consultation and to ensure that he took the work force with him. I believe that he has largely succeeded.

Mr. Campbell-Savours: Is the hon. Gentleman aware of the case being heard in the courts brought by the workers of Velindre in South Wales?

Mr. Grylls: Perhaps for that very reason, I do not wish to commnt on it. I am talking in generalised terms. Those who have visited British Steel and talked to Mr. MacGregor and other executives will accept that he has tried hard and, I believe, succeeded to a great degree. There have been some results. For example, in South Wales productivity levels are improving. This indicates that Mr. MacGregor has succeeded to a large extent in that area. The power to liquidate at the end of the day, if that unhappy event should happen, should exist as a signal to the taxpayer that there would be an end to all this business.
I wish to refer to the private sector. I considered the remarks of the right hon. Member for Salford, West fair, but I should like to go further. The right hon. Gentleman rightly expressed his concern over the 70,000 people who work in the private sector of the steel industry and their remarkable record of producing profits and preserving good jobs over the last 13 or 14 years. We must ensure that they do not disappear. This is clearly an area in which the House speaks with one voice.
The Bill does not go far enough in ensuring that as far as possible fair competition takes place. Our objective should be to ensure that over the next few months we do not see more private sector companies disappearing and going into receivership. It is important that the Secretary of State should give a clear direction to the British Steel Corporation about setting up future phoenixes so that what are described as the competition or overlap areas are clearly defined, and so that the corporation acts quickly.
Mr. MacGregor has gone only as far as suggesting that he will consider setting up further Phoenixes. That is not good enough. While he is considering setting up further Phoenixes and worrying, perhaps rightly, about the asset value of the parts that the BSC might put in, it is possible


that parts of the private sector, involving 70,000 people, could get into trouble and disappear like the tragedy of Duport.
An amendment should be tabled in Committee to provide clear powers of direction to ensure that where the BSC competes with private sector companies it forms Companies Act companies forthwith. Their establishment should not be left to the whim of the BSC or the speed at which it decides to proceed. That will not be good enough. My right hon. Friend the Secretary of State cannot adopt a "hands-off' approach and say "Let British Steel get on with it". He has a duty to ensure that it moves fast.

Miss Joan Maynard: Firth Brown is a large private steel company in Sheffield. Its largest customer is the BSC. There is no question of competition between the two organisations. Firth Brown wants the BSC to be successful because it is in its interests that it should be successful. I ask the hon. Gentleman to consider the position of GKN, which has lost a vast sum. He should not try to argue that only publicly owned industries are losing money.

Mr. Grylls: I think that there is no difference between us. In steel making, some nationalised assets, as well as privately owned assets, are losing money. The object of the Phoenix I operation, which was set up on 17 February, was to bring the two together. The assets brought into the new Phoenix I company were roughly equal in terms of assets. It took three weeks to set up that company.
The areas that the Government should be examining to ensure that Companies Act companies are brought into being quickly are the following: cold rolled strip, commercial quality flats, light sections and low alloy billet and bar. If the plant producing these products can be brought together quickly in Companies Act companies, I believe that we shall be successful in getting the nationalised assets and the privately owned steel assets—I make no differentiation between them—together in Companies Act companies so that they may survive in future. If this process is delayed it will be a great mistake.
The right hon. Member for Llanelli (Mr. Davies) and I have talked about the Duport works. On one occasion he and I had the opportunity of meeting some members of the Duport work force in his constituency. Their case was tragic. They said "We have done everything that you have asked. We have invested. We have made ourselves more productive. We have reduced our work force. We have a good productivity level, but the company has to close down." It was a tragic and heart-rending story.
That is an example that causes me to be worried about the future groupings of phoenixes. Developments took place at a slow pace. The BSC and, to some extent, the Department of Industry dragged their feet at various stages of the proceedings. It was the Bank of England that really made things move for Duport. The Bank intervened and speeded up the process. That means that the non-steel making process at Duport—it produces articles such as Slumberland beds—is able to continue and 3,200 jobs in the hard hit Black Country will survive. However, the process was too slow. That is past history, but I am deeply concerned that future developments will proceed at too slow a pace if matters are left to take place at the BSC's speed.
I hope that the Government will think about taking clear powers to direct the corporation to set up Companies Act

companies forthwith. We have not much option but to deal with the financing of the nationalised sector in the way that my right hon. Friend proposes—it is a fait accompli—but we can do something about the delicate state of the private sector, which is outside in the cold, with no taxpayers' money to support it. That is a fact of life against which no one can argue. We must put pressure on the BSC to move as quickly as possible.

Mr. Hooley: A few years ago the private sector in Sheffield had a brilliant opportunity to obtain public money through the National Enterprise Board but it decided to go for Lonrho instead.

Mr. Grylls: Given the State of the NEB now, it may be that Lonrho was rather a safer home. However. I do not want to be involved in that argument.

Mr. Russell Kerr: That is the unacceptable face of capitalism.

Mr. Grylls: I hope that my right hon. and hon. Friends will consider my arguments about liquidation and strengthen the Bill accordingly. I hope that they will bear in mind my argument about Companies Act companies. The Government should not allow the BSC to sit on its hands. The process should be speeded up and we should be able to see Phoenix II rise quite quickly. The sooner that that happens the sooner we shall achieve the preservation of as many profitable and secure jobs as possible. With that prospect, the House will be happier than it would otherwise have been on rather a gloomy day, a day that is gloomy at least for the taxpayer.

Mr. Denzil Davies: The hon. Member for Surrey, North-West (Mr. Grylls) referred to the tragedy of the Duport works, in my constituency, as did my right hon. Friend the Member for Salford West (Mr. Orme I. I think that it will come as no surprise to the House if I use this opportunity again to advance the cause of the Duport steelworks. The works have almost closed, and almost all the members of the 1,100 work force have gone home. In a few weeks no more steel making will be taking place at Duports at Llanelli. In the language of the book-keeper, which the Secretary of Slate for industry used when introducing the Bill on Second Reading, the asset, which comprises one of the most modern works in Europe, is now worthless. That is the language of the book-keeper and not the language that one would expect from a Secretary of State who is presiding over a basic and vital national industry.
The House well knows of the efforts that have been made to save the steelworks. Those efforts have involved the Prime Minister. We have had sympathy but no help from the Government. I do not intend to go over that ground again, as I think that it is well known. I wish to make it clear to the Minister of State and to the Government generally that they have not heard the last of the Duport steelworks in Llanelli. The fact that it is now about to close does not mean that the fight will not continue to reopen it and to preserve the asset of the works for the nation.
The Bill contains a provision that seems to be directed at the phoenix-type arrangement about which we hear so much from the Government. No doubt the Minister will tell us whether that provision is directed to that end. When the Minister replies I hope that he will tell us more about


the Government's intentions for the phoenix arrangements. They are important, especially to the Duport steelworks.
We were told that there were to be two phoenixes, but so far we have seen only one, and a fairly small one at that. It is only recently that the Minister said that there might be three or four phoenixes. It seems that the ashes of British industry will produce a flock of phoenixes. I do not believe it, but I hope that it is true. I hope that the Minister will tell us more about his plans for the phoenix enterprises, and how many of them there will be. I understand that in ancient Egypt the phoenix appeared in public only once every 500 years. I hope that the Government will demonstrate rather more urgency than in the past and will not take the example that I have quoted from the phoenix.
My first question is: when shall we see the next Phoenix manifestation? When will Phoenix II appear, and who will be involved? Are talks going on? If so, with whom? As we have heard so far in the debate, no one seems to know what is going on either in the British Steel corporate plan or the private sector. Surely that is not how a Government who are concerned about the steel industry should carry on. I hope that we shall be told when we shall see the next stage of the phoenix operations, and which companies the Secretary of State and the Government expect to be involved in that operation.
The second and perhaps more important question concerns public accountability. If the phoenix arrangements get off the ground, they will do so only with public money. There is no hope of reorganising the private sector without an injection of public money, and that money will come either directly from the Government or indirectly from the British Steel Corporation. Who will decide now that public money is to be spent? What are the criteria for using public money, either directly or indirectly? What criteria will be used to decide which firms are to be helped? Will they be commercial criteria? Will they be on the basis of productivity, the costs of producing steel, or the efficiency of the plant?
If, when the Minister announces the phoenix operations, I find that they involve many firms that are less efficient than the Duport works in Llanelli, in my constituency, and if Duport is not included, I shall want to know why. I do not have anything against the other firms, but Parliament must know on what basis public money is to be spent and what the criteria are to be, so that we can judge for ourselves whether the criteria are purely commercial or whether politicial factors are involved.
After all, certain interests are represented in the House. Members of Parliament, mainly Conservative Members, are involved in private steel companies. I do not criticise them for that, and they do not attempt to conceal their interests. I hope, therefore, that we shall be told clearly tonight which criteria will be used in deciding which firms are to be involved in the phoenix operations.
Thirdly, may we be told to whom we are to put our case? I want to put the case of Duport, in Llanelli, despite the fact that it is now closed. After all, the assets are still there. Do I go to the Department of Industry, the Welsh Office, the Minister of State, or the British Steel Corporation? Who is in charge of the phoenix operations? Is it to be left to Mr. MacGregor, of the British Steel Corporation? I have a duty to my constituents and I want

to know whom I approach next to argue the case for Duport. Duport is a very efficient works, and should be included on Phoenix I, II, III, or whichever operation is appropriate. Those questions are all unanswered, and that is not the way to help the steel industry—both the private and public sectors.
I have been told that it is possible to put steelworks into mothballs. I suppose that that is possible for a short time, but time passes, skills develop, work forces gradually move away, and it is difficult to get them back. Time is short. In the case of Duport, the Government have acted wrongly. They could have done a service to the nation and at the same time to my constituents and the private steel industry by helping one of the most efficient steelworks in Europe. I still hope that it is not too late. We need action, and we need it fast.

Mr. Richard Page: What we have to face tonight is the real and desperate position of the British Steel Corporation, in that, as my right hon. Friend said, it has been declared bankrupt, in commercial terms, and the estimated losses of 1980–81 that were announced yesterday, of about £660 million, bear sad testimoney to that fact.
However, in the Bill we have a recreation of the corporation—I suppose that one could call it a true phoenix—on a new financial foundation, coupled with a new corporate plan, so that it has another chance of achieving some form of viability, but I must remind the House that, again, it is supported by taxpayers' money.
I do not believe that anyone in this Chamber or in the British steel industry underestimates the difficulties that lie ahead. Unless there is co-operation on all sides—unions, management, the private sector, and the Opposition and Government Benches—it will not be possible to overcome the difficulties that lie ahead, especially when the projected losses for 1981–82 are about £318 million. I shall come back to some of those difficulties later.
I also feel that there will be little point in conducting post mortems and compiling lists of past errors and mistakes. The only thing that we should recall before continuing our debate on the corporate plan's chances of success is that it is again the poor taxpayer who has supplied the billions of pounds now being wiped off the slate in this measure.
I have studied the corporate plan and compared it with past projections, and have found that for the first time there seems to be a mood of realism in British Steel. It is facing the reality of the market place and is starting to bite the bullet of operating in a reduced market, which will mean reducing overheads and, more painfully than anything else, reducing employment possibilities.
We must also face the fact that, tough as the plan is, it is based on calculations that could be regarded as overoptimistic. First, I must draw attention to the exchange rate that is used in the calculations of the corporate plan. The plan is based on an exchange rate of 2·20 against the dollar and, more important, of 4·20 against the mark. A variant on that exchange rate can mean tens of millions of pounds on the profit and loss account.
I do not tonight advocate a fixed exchange rate. However, it is only fair to say to my right hon. Friend and to Ministers on the Treasury Bench that this is not the only State industry that has based its future calculations on that


limit of exchange rate. That factor must be borne in mind when they are considering the various operations within the money markets.
Secondly, agreement must be reached quickly with other countries within the EEC to accept more sensible levels of plant production against their capacity. That must be achieved if we are to avoid a continual glut on the market, with consequential uneconomic pricing, as is happening now. If there is no agreement, the huge losses that are occurring in every plant and every country will continue within the EEC.
I therefore urge my right hon. Friend, when he goes to the Council of Ministers on 26 March, to maintain the tough stance that he has already taken and drive home the fact that unless we have demand and supply in more economic balance there will be economic disaster for every steel plant within the EEC. The Council must appreciate that fact far more than it has done so far in the voluntary pact that is now coming to an end.
In asking for this form of protection, I do not say that British Steel should stop the continual drive towards efficiency and toward reducing the number of man-hours per tonne of steel produced. I should point out here that some encouraging figures are starting to emerge from British Steel, on which the corporation should be congratulated. I have no doubt that, with the capital reconstruction removing the burden of interest charges and some of the high gearing, together with increased efficiency, we shall see a shift towards reduced losses and, with luck, profitability.
I turn to the difficulties facing the private sector. There is no doubt that its difficulties have been created by the drop in world demand and a most aggressive sales campaign by our EEC competitors. We must remember the rather artificial price umbrella that the BSC held over the market place for many years—an umbrella that was ripped away in the damaging strike of January last year.
That strike showed a lack of appreciation of conditions in the real world by the Iron and Steel Trades Confederation, which let in foreign competition and damaged both State and private industry. I would like to think that the ISTC is now being a little more co-operative and appreciative that only together shall we overcome the difficulties. We shall not do it by fighting each other.
I am told that the overlap on operations between the BSC and the private sector is about 20 per cent. Both groups are being hurt in the aggressive pricing of the market place. If we want the BSC to be aggressive to increase its market share and to reduce its demands on the taxpayer, we cannot ask it to protect and give a price advantage to the private sector.
Though we should welcome the commitment that any complaints about price cutting will be referred to the Under-Secretary of State for Industry, we must accept the almost impossible position in which he will be placed and the difficulty of obtaining meaningful results from an investigation.
Probably the most realistic assessment of the position was by Mr. Clancy Scheuppert, the chief executive of Sheerness Steel. When he was asked if the BSC was deliberately cutting prices to put the firm out of business he replied that the corporation had to match Continental prices to stem imports. He said that the BSC had been forced to bring down prices and that, as a consequence, private steel makers were hurt. That is different from

saying that the BSC is deliberately driving the private sector out of business, although I am sad to say that the result may be the same.
The only practical way is to encourage joint partnership with the private sector, in such arrangements as the phoenix operations to which reference had been made, so that there is a united approach to fight off foreign competition. I agree with the remarks of the right hon. Member for Llanelli (Mr. Davies) about financial arrangements being made public so that the private sector, the BSC and we know exactly how funding will he made available.
Whilst this corporate plan faces the realities, I have to say that many of the actions being taken now would have been far less painful if the people involved four or five years ago had had the guts to take the decisions then. Although we are starting out from a precarious foundation, I wish Mr. MacGregor and his team every success and cooperation in tackling this most difficult of tasks.
I should now like to draw attention to the activities of the British Steel Corporation (Industry) Ltd., which I describe as the social conscience of the BSC. It is now being run by the previous chairman of the BSC, who is taking a most enthusiastic and conscientious view of his duties. I should like to believe that its activities in providing job opportunities in areas faced with inevitable closures will continue to be actively encouraged.
To date BSC (Industry) Ltd. has operated in 12 areas of concern. It has established representatives to deal with business men interested in setting up companies and providing job opportunities. The present position is encouraging. Out of about 5,000 applicants, BSC (Industry) Ltd. has decided to support about 500 with management advice and start-up finance. When they are all up and running they should provide about 15,000 job opportunities. That is an area of hope that we should encourage and bear in mind.
There is not time to deal with each area in detail and to give a progress report. However, one of the most difficult areas that we can envisage is that of Consett. It already has 60 serious offers, with inquiries coming in at a most gratifying rate. It is hoped that by the end of this year 1,000 job opportunities will be offered in Consett. Finance is coming in and is being provided from within the EEC social fund, the European Investment Bank and the European Coal and Steel Community.

Mr. Donald Coleman: I am interested to hear the hon. Gentleman say that help is being made available through BSC (Industry) Ltd. to Consett, Corby and other places with BSC works. What about Llanelli and the private sector? What will the Government do to help, because it employs steelworkers too?

Mr. Page: I should like to spend more time talking to the hon. Gentleman about the need to set up small firm investment banks such as operate in the United States to give small firms the opportunity to go into depressed areas and to start real growth opportunities instead of some of the present artificial job schemes, worth while as they are.
The British Steel Corporation has gone through a difficult phase. We are wiping out a lot of taxpayers' money. I hope that in the reconstruction the parties involved will not fight each other but will co-operate to ensure that taxpayers' money is spent profitably and economically, so that we have a viable steel industry.

Dr. Jeremy Bray: I am sorry that the Secretary of State has not seen fit to sit out the debate, because we all have many points to put to him personally.

Mr. Tebbit: That is an unnecessary remark. My right hon. Friend has other extremely important and urgent responsibilities, of the type indicated by his statement this afternoon. He will return to the Chamber at the earliest opportunity. In the meantime, I hope that the hon. Member for Motherwell and Wishaw (Dr. Bray) does not find it offensive to put his points to me.

Dr. Bray: I do not believe that the business of the House can be less important than other matters. The Secretary of State is calling for enormous sums. He is responsible for a major industry. He is a force in the Government, who have set the economic background against which the industry must operate. He ought to take the medicine.
The prospects of the BSC depend in part on circumstances outside its control. The most important circumstance is Government policy. I should like the Secretary of State to do the sums the other way round. He has set his economic policy and he has seen, painfully drawn out in the public and the private sector, the consequences of that, not only for the BSC but for ICI, GKN and the whole of manufacturing industry. He could have done the sums the other way round. He could have examined the massive investments programme in the BSC, ICI, the chemical and oil industries and the other great capital-intensive industries. He could have asked what sort of economic policy was necessary to validate the technological changes and capital investments that have been made in the past. He would have arrived at a totally different set of conclusions from those with which we are confronted in the House today.
We should consider what we are doing writing off the £3,500 million that the Minister of State brushes away as a minor matter, which does not deserve the attention of the Secretary of State. It is only the accumulated losses that British Steel has made over recent years which must be considered but the fact that the assets of British Steel—the modern steel plants that have been built—have never been operated in the environment for which they were designed.
I refer hon. Members to the notes in the BSC annual report last year on the revaluation of assets that took place on 1 April 1979. At that time, the write-down of assets was calculated in relation to
(a) Specific plant items for which there is no expected need in the forseeable future. (b) Assets which will go out of use due to works closures which have been announced since 31 March 1979, some of which have already been effected. (c) General over-capacity throughout the Corporation, comparing current installed capacity (after taking account of the two categories above) with an expected annual requirement of 15 million tonnes of liquid steel.
On 29 July last year British Steel was planning at that level, which has now been confirmed in the corporate plan.
As the note says, it is wholly proper to write down assets under the provisions of Statement of Standard Accounting Practice No. 12, which requires that
Where the unamortised cost of an asset is seen to be irrecoverable in full, it should be written down to the estimated recoverable amount, which should be charged over the remaining useful life.

However, that is the accountancy of the doss-house. If one is running an industry that, on its record, one expects to maintain profitable viable operations, far from writing down assets to a recoverable level, under current cost accounting procedures one should write up assets to their replacement value and depreciate on that basis. If the BSC had done that we would be writing off not £3½ billion but much more. That larger figure is the measure of the disastrous policies followed by the Government. It is not £½ billion, but a much larger sum. The Minister of State shakes his head. Perhaps he would like to say why.

Mr. Tebbit: I shall reply to the hon. Gentleman's speech later, when the Secretary of State is here.

Dr. Bray: I do not think that the hon. Gentleman understands the argument.
The fact is that we are facing an industry that has been placed in an environment in which financial discipline cannot operate. Any realistic financial disciplines that could have made sense have been destroyed by the economic policies of the Government. Therefore, in that context it is useless for them to deliver sermons about having to break even in this industry by a certain date. The industry knows that it is totally vulnerable to the economic environment in which it is set.
Let us be clear about what the Secretary of State said. He said that the Bill wrote off the overestimated investment programme in the early seventies. That is not a physical operation. With a few exceptions, the plants that were built are taking the base load of the corporation, for example, those at Thrybergh, Redcar, Port Talbot, Llanwern and Ravenscraig. Those assets, which were built in the seventies, are operating. We are physically writing off plants that were built many decades before that.

Mr. Nicholas Lyell: Will the hon. Gentleman explain why this industry is more vulnerable to the economic climate than any other industry?

Dr. Bray: First, it is highly capital-intensive. Secondly, it is the basic supplier of the capital goods industry. An industry like ICI is capital-intensive, but it supplies across the whole spread of the gross domestic products, and not just investment.
Therefore, when one hammers GDP and it goes down by 10 per cent,. ICI output goes down by 10 per cent. When GDP goes down by 10 per cent. and investment goes down by 40 per cent. steel demand goes down by 40 per cent. That is why the steel industry is the advance indicator of what will happen to the whole manufacturing industry today. Does the hon. Member agree?

Mr. Lyell: Yes.

Dr. Bray: I am grateful to the hon. Gentleman.
Therefore, I hope that there will be less mindless slanging from the Secretary of State and Conservative Members who are simply concerned with putting their knives into public enterprise and who say that British Steel has been particularly incompetent. By normal technical operating yardsticks, it has not. It has been efficient, it is improving its efficiency, and it is needing to make further improvements. However, hon. Members should realise the particular nature of the industry's markets and the capital intensity of the industry, which have caused the results with which it has been faced.
The Secretary of State said that the industry was effectively bankrupt and that it could not be liquidated


under present legislation, but under the Bill he is making provision virtually to reduce the activities of the Corporation to nil. He is not exactly holding out an encouraging prospect for the reconstruction of the operation of the corporation, nor is he reflecting the point of view put across by Mr. MacGregor and his colleagues on the BSC board, who are having to keep the ship afloat. No chairman could speak as the Secretary of State does and keep his head above water for one day.
The Secretary of State went on to compound the mischief that he has done to the industry by saying that further legislation would be introduced if liquidation was necessary. The Secretary of State is a business man, because he cannot help being a business man. He is a business man on a massive scale. He is a banker on a tremendous scale. However, he is the most disastrous business man that this country has ever had. Every 10 years or so the Secretary of State has an enlightenment. I have watched him have two enlightenments since I have been in the House. His first enlightenment was on the nature of the social services and his concept of accumulative disability. The second was the enlightenment that led to the disastrous economic policies of the Government.
Every time, the Secretary of State realises his mistakes afterwards and confesses them in the most engaging manner. Conservative Members face the problem of whether they can afford to wait for his next enlightenment. If the right hon. Gentleman is allowed to run his harum-scarum course through British industry, not only the BSC, ICI and GKN will suffer; the whole of manufacturing industry will be unable to recover without total financial reconstruction of the kind that we are having to carry out today for this part of industry.
Will Conservative Members consider the political implications of such a Bill not just for the BSC or the public sector but for Unilever, ICI and GKN? Bills such as this will flock in if we have another two years of this sort of economic policy. Conservative Members have had a gutless reaction. They will vote billions away to this disastrous Secretary of State and will not have the courage to vote against him in the Lobby.

Mr. Michael Ancram: Is the hon. Gentleman saying that he will vote against the Bill tonight, in view of the need to protect steel in Scotland?

Dr. Bray: Of course I shall not vote against the Bill. I am talking about Conservative Members not voting against the economic policy that has made the Bill necessary. The Bill is an inevitable consequence of the Secretary of State's policy. That is where there is the real measure of the lack of courage on Government Benches. They see the disastrous course of manufacturing industry, but they just sit there like dummies, letting it all flow over their heads.

Mr. Grylls: Is the hon. Gentleman really saying that the losses have occured only during the past two years? He cannot expect the House to take that seriously. Some losses occured during that time but others occured during the 12 years since nationalisation. They are a result of mismanagement after nationalisation.

Dr. Bray: The figures for the losses contained in the statement on the corporate plan show that the highest losses occured during the past two years—some £1,200

million of the accumulated £2,800 million. They were high because of the intolerable exchange rate and the drastic cut in investment in Britain.

Mr. Richard Page: I appreciate what the hon. Gentleman is saying, but does he accept that the figures for productivity per man—the tonnes per hour produced—puts Britain at the bottom of the league rather than in the middle, which is where it should be in view of our equipment?

Dr. Bray: I represent Motherwell, the home of the Ravenscraig works, which has international manning standards. Motherwell also has a special steelworks, and the condition of the investment was that it would not be made until the unions had agreed on full international manning standards. The unions have agreed to the manning standards required by the corporate plan. I constantly discuss manning problems and inter-union problems frankly and freely with both sides of management in the BSC. Further improvements are needed in a number of works. I hope that the hon. Gentleman will not fail to pay tribute to the achievement that has been made, especially in the large flat products works at Port Talbot, Llanwern and Ravenscraig.
I shall conclude with three specific points about the immediate position. First, there is the impact of the closure of Linwood on the future of the strip mills in general and the cold and hot strip mills in Scotland. Mr. MacGregor is reported as saying that there will be a loss of 15,000 tonnes a year from Gartcosh. That is relatively small in relation to the total output. There is no reason for any immediate threat of closure of the Gartcosh strip mill. I hope that there will be no such suggestion. We must have, and maintain, a complete cold strip and hot strip capacity in Scotland, which means maintaining the Gartcosh works.
Secondly, various statements in the corporate plan refer to the rundown of research. That is a dangerous development. If the corporation runs down its research not only the long-term work but the current operating efficiency of the works will suffer. Unless the industry maintains the absolute frontier of technological capability across the whole area, from metallurgy to instrumentation, it will inevitably suffer in the operating results and efficiences of the works.
Thirdly, the corporation has been given licence to compete with import prices. It assists its major customers by matching prices for fabricated goods in export markets where steel is a large proportion of the total export order. Let us take the example of the Esso project at Moss Morran, with its 150 pressure vessels and 200 heat exchangers. A large proportion of the cost of that project relates to steel. If that steel is purchased from the BSC at the home market price the fabricators will be in a difficult position to bid against foreign fabricators who have obtained steel from Japan at a much lower price.
Once it becomes necessary to trim and match prices to match the prices of imported steel in order to support fabricators in export markets—which represents a large proportion of their steel orders—there is no limit to the amount of support that must be given. The complaints of the private sector are wholly justified. The Government have got themselves into an impossible position in their support for prices. The cure is not to lean on the BSC because of its pricing practices but to get the exchange rate


to a level at which British industry generally can compete. Not only the BSC is suffering; we have seen all firms suffer, across the board. In the long run there is no cure for the difficulties of the BSC which is not equally a cure for the economy as a whole.
This is a sobering Bill. It is a small Bill, and we shall not divide the House on it. It is sobering because it is a condemnation of the whole economic policy of the Government.

Mr. Hal Miller: I hope that I shall not aggravate the apparent annoyance of the hon. Member for Motherwell and Wishaw (Dr. Bray) if I do not follow all his arguments. My remarks are intended to pursue a slightly different line. I hope that he will forgive me, but, having been described by him as a gutless dummy, I feel entitled to make some form of reply.
When the Labour Party was in office, at a time when there was not a world-wide recession—that is an important point to bear in mind—the BSC's losses for 1975–76 were £255 million; for 1976–77, £95 million; for 1977–78, £443 million; and for 1978–79, £309 million. Where was the hon. Gentleman then? What was the state of world trade? His remarks took no account of the significant decline in the number of customers.
There has been a world-wide reduction in capacity in the motor vehicle industry, by no means confined to Britain, but experienced by other countries following other economic policies. As I come from the West Midlands I am qualified to say that our workers have experienced a loss in real wages during the past decade compared with most other occupations, regardless of the economic policies followed by the Governments of my right hon. Friend the Member for Sidcup (Mr. Heath), the right hon. Member for Huyton (Sir H. Wilson), the right hon. Member for Cardiff, South-East (Mr. Callaghan) and my right hon. Friend the Prime Minister. I do not feel that the hon. Gentleman has established a case.

Dr. Bray: The hon. Gentleman asked what I was doing. I was speaking against the economic policies of the Labour Government. In support of my argument I abstained from voting in the Lobby. I hope that the hon. Gentleman will do the same.

Mr. Miller: I have been supporting the policies of my Government in the Lobby, in the same way as he claims to have done—

Dr. Bray: I abstained from voting.

Mr. Miller: I am not giving way to the hon. Gentleman. I do no wish to increase his wrath. As he described me as a gutless dummy, I feel obliged to point out some of the apparent inconsistencies in his argument.

Dr. Bray: Will the hon. Gentleman give way?

Mr. Miller:: No, I shall not.

Dr. Bray: rose—

Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. The hon. Member for Bromsgrove and Redditch (Mr. Miller) said that he would not give way.

Mr. Miller: The line of argument that I want to pursue relates to the argument put forward by the right hon.

Member for Llanelli (Mr. Davies) and the right hon. Member for Salford, West (Mr. Orme). I wish to draw the attention of the House to the difficulties of the private sector in the steel industry. To be fair, the hon. Member for Motherwell and Wishaw touched on that point. I wish to ask some questions about the nature of the phoenixes that are to rise. I am not sure how we should domesticate these birds. My hon. Friend the Member for Hertfordshire, South-West (Mr. Page) raised the question, as did the right hon. Member for Llanelli, of how they were to be accountable. Whether we take them with a pinch of salt, put salt on their tails, or however we treat them, I hope that the Minister will enlighten us when he replies.
The first point that I want to make relates to the private sector of steel making—including the downstream activities. Far too much attention has been concentrated on primary steel making. One of the difficulties that we face is the large range of activities conducted by British Steel inside its overall total of 40·4 million liquid tonnes equivalent of steel and the expansion of its activities downstream from steel making into new areas of competition with the private sector.
The industry, both public and private, is faced with the need to reduce capacity and to become more competitive, but it is difficult for the private sector to stomach that. Whereas the public sector is enabled to obtain financial assistance from the Government for the necessary adjustments in capacity or for redundancies and, indeed, even for competing with imports, that assistance is not available for the private sector.
The Opposition have fairly pointed out that heavy losses have been sustained in the private sector regardless of the comparative efficiency of those installations. It is no secret that several firms in the private steel making sector are losing £1 million a month. They naturally find it difficult to understand the Government's policy in supporting the losses of the BSC and the redundancy provisions, which are a great deal more favourable than any offered to workers in the private sector, and subventing competition with imports on a basis that is not available to them. In the end that will inevitably drive them into bankruptcy.
In the case of Duport that virtually happened, until a last-minute rescue operation was arranged with the assistance of my hon. Friend to whom I pay tribute. The details of that rescue have not been tied up. There are still important points of principle to be resolved, one of which concerns the valuation of the assets of the Llanelli steelworks, which were built in the wrong place as a result of Government policy diverting investment away from the West Midlands, where the works should have been placed to supply downstream activities and to take advantage of the works in the constituency of my hon. Friend the Member for Dudley, West (Mr. Blackburn).
I welcome the principle of the Bill, as put forward by my right hon. Friend. It removes the duty on the British Steel Corporation to supply iron and steel of all kinds to all sorts of customers. That seems to open the door to dealing with and limiting the range of the corporation's activities. I shall return to that.
I also welcome the fact that the Bill, as my right hon. Friend says, provides a route to enable the corporation to sell off its assets or to go into partnership with the private sector with part of its assets. I find it difficult to understand how that will be achieved by the phoenix route.
We originally heard of Phoenix I in connection with Guest, Keen and Nettlefold. Phoenix II was to deal with Duport, Hadfields and Round Oak. The difficulties with Duport meant that its case had to be considered with rather greater rapidity and separately from the others, but, from the information that I have, it does not seem that the Government are making real progress with Phoenix II. I should be grateful if my hon. Friend would give us some information and say whether he still thinks that that is a viable form of bird or whether there will have to be a more limited regeneration of operations, perhaps involving fewer private companies. My present information is that the BSC will not be in a position to take part in Phoenix II, or even to conclude an agreement on it, until the autumn.
If private firms continue to lose £1 million a month until the autumn, there will be a great many disgruntled shareholders, quite apart from disgruntled workers, managers, customers and suppliers of the private firms involved. People in the private sector feel that the Government's policy, whether consciously or unconsciously, is resulting in an expansion of the public sector at the expense of the private sector.
My hon. Friend the Member for Hertfordshire, South-West said that the overlap between the BSC and the private sector was only about 20 per cent. However, that is on the present scale of operations. Once the BSC has acquired the assets of Duport, which it wants to obtain—the bright drawing, the rolling and the stockholding—it will increase its competition in the downstream sector.
The mention of Phoenix III and IV has led private industry in the downstream sector to conclude that there will be a further strengthening of competition from the BSC or from the phoenix units in the downstream business. That raises the question of the basis on which the phoenix schemes compete. They may be part of a Companies Act company, but that does not mean that the Government, as a major shareholder, will not support them in the way that I have tried to illustrate to my hon. Friend is considered to be unfair by many in the private sector. The private sector is not afforded any aid to compete with imports, to make the improved redundancy payments and to effect the necessary closures.
There is also the question of energy prices, whether supplies are on an equal footing between the BSC and the private sector, quite apart from the wider issue of energy prices raised by the right hon. Member for Salford, West.
In the background to the corporate plan dated 23 February supplied to the House it was stated that the BSC still had an estimated energy cost penalty of between £50 million and £70 million a year relative to EEC producers. I do not think that the measures announced in the Budget will have remedied that to the extent that many expected. The Budget measures did not deal at all with foundry coke.
The competitive situation is very important, in my view. For instance, in the scope of the BSC's operation I cite as an example the Stanton and Staveley foundry. My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) has already submitted evidence of extremely unfair competition from that foundry with a private foundry in the West Midlands. Reports have come through to me of other activities by that company which no private company would be able to sustain. That may have been set up as an independent, autonomous unit,

perhaps to be converted into a Companies Act company, but I do not think that either the administrative or the legal measure will answer the point that I am trying to make.
There is a serious doubt in the private sector about the course of policy that the Government are taking and how the phoenixes will evolve. There is already a widespread concern and a deep sense of injustice about the unequal treatment meted out between the public sector and the private sector on the points that I have mentioned—reductions of capacity, redundancies and competition, and possibly also on the energy question. How is the private sector, particularly downstream, to consider its business plans on the basis of the information and the likelihoods presently apparent to it? Will not private companies seek to go further into trading and less into processing and manufacture in Britain? Will they not import more rather than be tied to the BSC as a monopoly supplier? What answers will they give to their work forces, which must, naturally, be concerned about the future of their jobs?
I come finally to the political point. Private sector companies are saying "How, under a Conservative Government, are we getting into a condition in which even the steel companies denationalised by the Labour Government are now at risk and the only solution proffered to them is that they should be swallowed up once more by the BSC, in whatever guise that may be put forward?" That is the sort of political question that private concerns in the West Midlands are asking me. I should be very grateful for anything that my hon. Friend the Minister can do tonight to help me to give them an effective reply in order to set those real fears and resentments to rest.

Mr. James Tinn: I shall resist the temptation to join my colleagues in the exhilarating sport of chasing after the Secretary of State, not only because he is rather a large target and easy game, but also because, in any case, I have been a lifelong opponent of blood sports. I go even further. I would support a close season on the hunting of the Secretary of State—although even if my colleagues were to go along with that, I am afraid that the right hon. Gentleman himself, by his actions, would ensure that it was a very short close season.
I want to address myself to two major points. First, I should like to take up strongly the accusation, the smear, that steel workers have in any sense been featherbedded—cushioned by the taxpayer—and have been a burden to the taxpayer, in the way that unfortunately, has been so often suggested and even, occasionally, plainly alleged from the Conservative Benches. I react pretty strongly to that, having worked in the industry.
Anyone who thinks for a moment that steel workers or blast furnace men have ever been feather-bedded should try a short spell in the industry. He should set off at half-past five on a winter's morning, perhaps climbing up the hill to the works for the first shift, or coming home shortly after six o'clock in the morning after a night shift. He should have a walk around the bottoms of the blast-furnaces, and around the smelting shops, BOS plants, continuous casting plants, and so on. He should then ask himself—he should certainly not dare to ask the workers—whether the workers appear to be featherbedded or cushioned in any sense, and whether they are doing a fair day's work for the money that they are earning.
I used to climb a hill to the steelworks. It used to stand overlooking the river Derwent, across the border into Northumberland. It looked almost like a Vesuvius with the slag cascading down the sides of the tips, with beautiful country surrounding it, moorland, rivers, and so on. It was the heart and life blood of the town. But now, if one is on the moorland roads looking eastwards towards Consett at night, one will not see in the works so much as a 40-watt bulb glowing. The furnaces are cold. They are already being dismantled. One will see plenty of men out walking their dogs, as men did in the thirties, because that is all they have to do. Those men were never feather-bedded in their working lives. They are certainly not feather-bedded now, although the full and savage impact of that murder of a town is still fully to be felt because they are still benefiting from the redundancy payments—not wasting them—which at present are to some extent anaesthetising the surgery, the butchery, that has been done on the town.
There is no doubt that the steel industry has had massive amounts of money over recent years. Everyone is entitled to ask "Where have those amounts gone, and how have they been used?" I have looked over the figures today. Rounding them off slightly it is interesting to find that two-thirds of the money has gone on public investment. I readily acknowledge that a very substantial part of that has gone in my constituency at the Redcar complex—in investment, though, for the future, as my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) has pointed out. This investment is not wasted money. It is not feather-bedding the workers. It has established steelworks of a technological level to match the best in the world, and with manning levels comparable and competitive with the best in Japan, or elsewhere.
Those investments cost money. Sadly, a very considerable amount of money was spent on building those plants at times when none of us on either side of the House, in Grosvenor Place or elsewhere, could guess or appreciate the catastrophic impact that the world recession would have on the steel industry. Many of the plants that have been closed, including that at Consett, have been closed partly as a price that is being paid for the massive investment that the corporation undertook, and which, in the long run, will be shown to have been rightly undertaken, although in ignorance of the immediate future that lay ahead.
Two-thirds of the money has gone on investment in new plant. That is a good bet by any standards—unless we are prepared to write off any British steel industry altogether. A quarter of the rest of the money has gone on interest payments. I welcome the easement that the Bill provides in that regard. It is absolutely essential. I should have liked to see it sooner, but nevertheless I give a very warm welcome to it now.
The rest of the money, about 10 per cent., is taken up in redundancy payments. They are a necessary charge on the conscience and the pocket-book of the industry for men who have devoted their lives to it. It is ironic that the industry should have to bear that burden, because the men would far sooner earn their livings in the industry in which they grew up and developed their skills. Despite the bad conditions and the risks involved, they have a feeling for the industry. There is a close family relationship in terms of commitment. The feeling is, perhaps, akin to that felt

by the miners for their industry. The men would far sooner work than draw redundancy payments. Less than 1 per cent of the money has gone on job creation.
I do not want to dwell on the negative aspects of the issue for too long. We must consider how the industry's future should be determined. I am happy to report that the workers on Teesside are equipped with modern plant that is comparable to that of the Japanese. Indeed, the blast furnace was designed by the Japanese. In Redcar, steel workers have been given the tools. I am glad to say that they are breaking records. The Pellet plant attached to the blast furnace is breaking records. The blast furnace itself has a capacity of 10,000 tonnes a day. It has fully recovered from the setbacks of the industrial dispute. It is achieving, not only record output ahead of target, but record figures for low fuel consumption. The oxygen steel making plant at Lackenby and the continous casting plant are also doing well.
I have tried to inject a more positive tone into the debate. Given the period that we have gone through, it is inevitable that many of our debates have been negative and critical of one party or the other. Hon. Members have tried to attribute responsibility for this and that. They have tried to fix the blame where they think it lies. On Teesside, at Ravenscraig and at modern plants in Wales the same situation applies.
Even in the depths of its greatest recession, the industry is demonstrating that if the workers are given the tools and the equipment to produce steel, they will out-produce the best in the world.

Mr. Gerry Neale: Through my hon. Friend the Minister, I apologise to the Secretary of State, as I was unable to be in the Chamber when he addressed the House. Many hon. Members come from or have constituencies with steelworks in them. There are no steelworks or steel workers in my constituency and I have no knowledge or experience of them. I have no hesitation in saying that, with one exception, the constituency of Cornwall, North has little sympathy with, or concern for, the plight of the steel industry. However, like the vast majority of constituents, they pay for the steel industry's losses.

Mr. David Lambie: What about farming?

Mr. Neale: It is important that the views of so many people should be borne in mind. I accept that those who have steelworks in their constituencies are faced with considerable problems. Many of their constituents are faced with the loss of their jobs, short-time working, and so on. My constituency is third in the league of constituencies with the greatest number of small businesses. The constituents of Cornwall, North do not need to be told about the problems of unemployment. They know about unemployment. It is one of the worst areas for unemployment.
The hon. Member for Redcar (Mr. Tinn) spoke with great sincerity about the problems of working in a steelworks. He spoke about the difficulties of turning out early in the morning, and so on, as though those difficulties were unique to the steel industry. I do not wish to belittle the hardships involved in working in the steel industry, but people in my constituency work through the


night lambing on Bodmin moor. Others spend the night fishing. In emergencies, men go out in lifeboats. Such people feel that their jobs are just as difficult and as vital as those of the steel workers.

Mr. Tinn: I do not quarrel for one moment with the hon. Gentleman. I should not join with anyone who suggested that such hard-working people were featherbedded. I was defending steel workers against the accusation that their jobs are feather-bedded.

Mr. Neale: Cornwall's industry has suffered the most drastic structural changes during the past two centuries. There have been considerable alterations in the basic structure of local industry. Unashamedly, I shall direct my remarks to those areas that interest my constituents, and many of those in rural areas.
All small business men realise the economic realities. They know that they have to provide a good service to their customers. They know that they must provide the services or the goods when they are required, and at a price that the customer can afford. If they do not do so they will go out of business. Many small business men will argue that they have to live with a simple truth, namely, that the Department of Industry will not bail them out if they run into problems.
Whether Opposition Members like it or not—if they do not, there may be a presentational problem that needs solving—there is a strong belief in constituencies such as mine that the steel industry and its workers should live with that very truth. [HON. MEMBERS: "Farming."] There are other examples of the same thing. Two, three or four wrongs do not make a right.
At present, there is a considerable amount of frustration. I have great respect for my hon. Friend the Minister. I know that he is determined to bring a greater sense of reality into the public sector, and particularly into the steel industry. In addition, I have great respect for the BSC's new chairman.
I welcome the Bill in many respects. I think that the way that it allows the steel industry to be run down to a trimmer and fitter size, bearing in mind the world recession, makes sense. It makes sense also that it will be possible to sell off various parts of the corporation in due time. But I come back to what I sincerely believe to be the reaction of many people in this country to what we are doing in the Bill. We are, among other things, proposing to write off £509 million, the remaining debt to the national loan fund. I suppose that that makes sense. Then we read that another £3,000 million of the BSC' s capital is to be written off. I have to confess that when constituents put this to me I am somewhat bemused by these figures. Then we read that yet another £1,000 million can be written off on top of that. Worse still, there seem to be powers to invest another £1,000 million as a result of amending the 1975 Act, and more powers to invest yet another £2,000 million.
I have to tell the House that the fury of the people in my constituency is mounting and has reached a stage at which it has become almost unchallengeable. In fact, one constituent approached me quite recently and said "You look an honest sort of chap." I do not know, Mr. Deputy Speaker, how you cope with that sort of remark, but I find it very difficult to argue with it, particularly when it is said a second time, as it was by my constituent. Then he paused and it was in that pause that I realised that either he had

no idea whether or not I was an honest sort of chap or he was pretty sure that as a breed politicians are not, but that he wanted an honest answer on this occasion.
He said "If you had £5,000 or £10,000, would you invest it in British Steel?" I had to admit that I would not. He said "You are a solicitor and presumably a trustee on occasions. As a trustee of a fund, would you invest money for the trust fund in British Steel?" I had to admit that. I would not, and he said "You would probably go to prison, would you not, if you put that money into British Steel?" Then, of course, the inevitable question followed. He asked why I had put taxpayers' hard-earned money into British Steel.

Mr. Campbell-Savours: The hon. Gentleman may well guide his constituents when they read the reports of his speech tomorrow in the papers in his constituency, to which he will no doubt circulate it, but he might indicate to them that tens of thousands of steel workers descend on the national park in his constituency annually and spend their money propping up the economies of Devon and Cornwall. His area exists on the money earned by industrial workers in the Midlands, the Northern region, and Scotland, and he would do well to draw his constituents' attention to that before he starts knocking hard-working steel workers.

Mr. Neale: My constituents in North Cornwall would, of course, be very quick to remind me that they have already partly paid for the money that they are getting back in payment for holidays. They would see that as at least some return on the so-called investment that they have made in British Steel.
We really have to encourage the view that the taxpayer must be borne in mind in the negotiations and decisions that are made along with these vast injections of cash and when we come, as successive Governments have, to a position like this, in which it has recently been announced that this vast sum of about £1,121 million is to be put into British Steel this year. A constituent pointed out to me last weekend that the sum that was to go into British Steel was pretty closely equated to the sum that we were proposing to raise through the Finance Bill by petrol and diesel duty.
To show the frustration that exists—I repeat that I do this only because I feel that hon. Members from the steel industry constituencies must appreciate what the feeling is—that constituent said to me "If it had been necessary for the Secretary of State to go before the House when asking for this money and ask at the same time for the money to be raised on a particular item, what chance would there have been of this money going into British Steel? If, first, he had asked that the money should go into British Steel but had then said that it was to be raised by a 20p tax on petrol and diesel fuel, would it have gone through?" I leave that thought with hon. Members.
It may also be said by my hon. Friend that if we did not aid steel at the cost of, say, 20p on petrol, it would cost 25p just to let the steel industry find its own level in these very difficult times. But the argument that is then presented to me is that, presumably, five years ago the figures would have been 5p and 7½p; two years ago it would probably have cost us 10p on petrol duty and 15p if we had allowed it to find its own level. I think that the problem that we now face is that on the track record of the losses that have been referred to—and there was some


discussion of these across the Floor—we could well find, in another year or two's time, that the figures were even greater.
I have to say, in the absence of the hon. Member for Motherwell and Wishaw (Dr. Bray), that he made a point about the last two years' losses, but, looking at the figures for 1977–78, I can assure the House that it would be a great comfort to my constituents to know that while losses are running at £2 million a day at the moment they were at that time only £1·5 million a day.
On that point, therefore, it seems to me that there is a built-in incentive to guarantee that the problem gets larger and larger each year, on the basis that the likelihood gets less and less that any Government of any persuasion will have the courage really to tackle it. The position seems to me to be that, as my right hon. Friend the Prime Minister said in an answer at Question Time regarding redundancy payments to coal miners, however justified may be the solution to the problem that exists in these industries—and I concede not only to my hon. Friends but to hon. Gentlemen on the Opposition Benches that the problem is considerable—there is major frustration, exasperation and even anger among many ordinary people—people who are totally unrelated to the steel industry—about the sheer size of the sums going into it.
Therefore, while I welcome what my hon. Friend is seeking to do and wish him and my right hon. Friend the Secretary of State every success in their efforts to bring a far greater sense of realism to the industry at an early date, and while personally, as a Member for a rural constituency, I take great heart from the general optimism that seems to be expressed that this is now achievable, I cannot see that it would be serving the best interests of my constituents or of the country to go on for much longer funding these vast losses by inflicting on people like them the petrol and diesel duties and taxes of the high order that we are now seeing.

Mr. Stan Crowther: I shall try later to reply to the important point raised by the hon. Member for Cornwall, North (Mr. Neale). I was amused earlier to hear the hon. Member for Surrey North-West (Mr. Grylls) expressing profound confidence in Mr. MacGregor's enthusiasm for trade union negotiations. Unfortunately, the hon. Member is out of the Chamber. I was about to suggest to him that he should read the report of last week's meeting of the Select Committee on Industry and Trade. On that occasion I put it to Mr. MacGregor that Mr. Sirs of the ISTC had said "How can I be expected to support a plan I have never seen?" When I suggested to Mr. MacGregor that a little more consultation with the trade unions might have been desirable, he said "I did consult, but unfortunately Mr. Sirs was out of town that day." The significant words are "that day". Apparently, he thought that one afternoon's meeting with the TUC steel committee was adequate consultation. It is hardly what I would regard as adequate consultation on a matter that profoundly affects a major industry and will put 22,000 people out of work.
I am unhappy with the first part of the Bill. I cannot agree with the hon. Member for Bromsgrove and Redditch (Mr. Miller) that the scheme is designed to extend public ownership. On the contrary, it is a form of back-door

denationalisation. I am reluctant to accuse the Secretary of State of misleading either me or the House, but what is now being proposed is in total contradiction to earlier assurances given by the right hon. Gentleman.
The Under-Secretary of State for Industry, the hon. Member for Arundel (Mr. Marshall). assured my hon. Friend the Member for Penistone (Mr. McKay) in July 1979 that the Secretary of State did not intend to hive off the profitable parts of the British Steel Corporation Sheffield division to the private sector.
A little later I asked the Secretary of State for a firm assurance that the Government would not be denationalising Rotherham works. I said that I asked that question because of anxiety expressed by my constituents. The Secretary of State said in reply:
We certainly do not intend any attempt at wholesale denationalisation in the steel industry."—[Official Report, 23 July 1979; Vol. 971, c. 3.]
I pointed out later that I had not raised the question of wholesale denationalisation, but in his opening speech today the Secretary of State was getting on to the point of wholesale denationalisation. He made it quite clear that the proposals in clause 1 could well result in the BSC owning no steelworks; so he is now in favour of wholesale denationalisation.
When I wrote to the Secretary of State and pointed out that I had not raised the question of wholesale denationalisation but asked only about Rotherham, he replied to the effect that the assurance given by the Under-Secretary of State to my hon. Friend the Member for Penistone certainly applied to Rotherham works. He added:
I hope this will enable you to allay any anxiety and uncertainty among steelworkers in your constituency.
I shall not go through the whole catalogue of questions and answers and letters. The position has gradually changed. We have had to squeeze information out of the Government on how they have been shifting their position. They have not said in the Chamber that they have completely changed their views and are now in favour of wholesale denationalisation. Not until the arrival of the Bill has that been admitted.
On 16 December at a meeting in the Secretary of State's office in the House he admitted that he was "encouraging" the setting up of joint companies, in which the private sector would have a majority interest, to take over BSC assets. He also made it clear that the reason for this complete change of position between July 1979 and December 1980 was to save the private sector. He made no bones about it. He was anxious to prevent private sector companies being extinguished.
That is what the Bill is about. It is about taking valuable, potentially profitable assets of BSC, especially in the special steel sector, and handing them over to companies in which, if the Secretary of State gets his way, private interests will have the majority shareholding. He also said on 16 December that, as far as he could, he would insist on the new joint companies being 51 per cent. private sector and 49 per cent. BSC. That would take their borrowing out of the public sector borrowing requirement. On the first company that has emerged, Allied Steel and Wire, there is a 50/50 split. How Mr. MacGregor has managed to prevent the Secretary of State enforcing his views on that one I am not sure.

Sir Keith Joseph: It is still private sector, not public sector, because BSC has asserted that it is not seeking to control Allied Steel and Wire. Thus, its activities fall outside the PSBR.

Mr. Crowther: Yes, I know that because I raised the question with Mr. MacGregor in the Select Committee. It has been taken outside the PSBR without the need for BSC to accept less than half of the interest in it. Perhaps that will apply to cases that arise under the Bill—I do not know.
I am very unhappy about what I regard as the denationalisation by stealth which has been going on until now. The Secretary of State's assurances to my hon. Friends in 1979 have proved to be entirely worthless. That part of the Bill causes me no joy, although I welcome the principles underlying the financial restructuring. However, there are some matters on which I have considerable reservations.
For example, I am sorry that the Government are not taking over responsibility for the outstanding foreign loans, which will continue to impose a hefty interest burden on the corporation, although the size of it is apparently in dispute. What the Secretary of State said that afternoon does not accord with what Mr. MacGregor told the Select Committee about the size of the remaining interest burden after the restructuring. Mr. MacGregor was clear that it would be £100 million per annum. The Secretary of State said that it would be £69 million. There is a substantial difference.
If Mr. MacGregor is right, the interest burden per tonne of steel will be reduced from almost £14 to about £7, which will put it roughly in line with the position in West Germany but still much worse than that in the United States. Nevertheless, the general idea of restructuring is right. It is a pity that the Secretary of State has been so tardy in recognising the need for a realistic attitude towards Government support for major industries such as the British Steel Corporaion. If in December 1979 he had adopted the attitude that he is now adopting, there would never have been a strike. That must be clearly understood.
Under the proposal now before us, Government money will be available to the BSC for operating costs as well as for capital investment and redundancy and closure costs. Had that been the case in December 1979, a very damaging strike would not have taken place. However, I realise that there is more joy in Heaven over one sinner who repents than over 99 just men. I should not, therefore, be churlish about the Secretary of State's late conversion.
Unfortunately, however, the Secretary of State will now have to take his conversion a little further. This will be difficult, because it will involve breaking away from his ideological view that the Government are not responsible for ensuring that British industry is able to meet competition on equal terms. That is the point at which the Government seem to differ from everyone else—if not from Conservative Back Benchers, certainly from the Opposition. They are at odds with the TUC, the CBI and nearly all the employers' organisations on the fundamental point of whether they have a responsibility to ensure that British industry is able to operate in fair, competitive conditions. They say that they have not. I am afraid that the Secretary of State will have to change his mind on that as well, because capital restructuring of the

BSC will be a waste of time and money if the factors which make the British steel industry and steel-using industries uncompetitive are not dealt with quickly and effectively.
I was glad that my right hon. Friend the Member for Salford, West (Mr. Orme) referred to these matters at some length as they are extremely important. I shall not go over them in detail. The exchange rate cannot be mentioned too often. It is the most important matter of all. When the CBI came to the Select Committee on Industry and Trade a year ago today, on 19 March 1980, I asked how much of the loss of competitiveness of British industry over the past five years or so was due to changes in the exchange rate. The CBI said that about half was due to that. That is a significant answer, but that was a year ago.
The position has become worse in the last 12 months. I cite just one instance. In the six months to January this year the change in the position of the pound sterling in relation to the German mark and the French franc resulted in a loss of competitiveness for a typical product of BSC 's special steels of £50 per tonne. That is more than the total labour cost in producing that tonne of steel. Mere changes in the relationship between sterling and other currencies have caused a competitive loss amounting to more than the total labour cost. That is the measure of the problem that we face.

Mr. John G. Blackburn: The hon. Gentleman is developing an important argument relating to the value of sterling in world markets, which I believe has increased by about 24 per cent. Under the Labour Government, the price of the pound in relation to the dollar was $1·56. It is now $2·20. What would the hon. Gentleman regard as the value of the pound which would help the steel industry?

Mr. Crowther: I think that a reduction which would take us roughly half way back to the appallingly low figure that the hon. Gentleman quoted would probably be realistic. But I am not an economist. I am concerned with the effects of the changes that have taken place. I realise that there are disputes between members of the Government, and certainly between individual Conservative Back Benchers, as to whether the Government can do anything about the exchange rate.
Many hon. Members are satisfied that if the Government set their mind to it they could do something important in that direction. I do not pretend to be able to pick out a certain value of the pound which would be ideal for the British Steel' corporation. There must be an ideal value at which the BSC would gain the most benefit from a reduction in its export prices as well as in its import costs for raw materials. No doubt somebody could give the answer to that.
I emphasise that these factors bear not only on the British Steel Corporation but on its customers and on the whole of manufacturing industry. The output of manufacturing industry suffered an appalling drop of about 14 per cent. in 1980. That was the worst drop in this history and lies at the heart of steel manufacturers' problems. The BSC does not sell its goods in Woolworths, but to other manufacturers. When manufacturing industry goes into the doldrums, the primary producers suffer.
I shall not go into the details of the many other factors which give all kinds of competitive advantages to foreign steel makers in the EEC and elsewhere. These were


brought out in detail in the sector working party report and in the British Iron and Steel Consumers Council report, which I strongly recommend to any hon. Member who has not read them. They make it clear that competitors in other countries receive assistance with financing research and development, rail freight subsidies, low interest loans and coking coal subsidies, which have been mantioned many times in the House, as well as many other forms of assistance.
The net effect for the BSC has been a smaller share of a smaller market. This is where the difficulty lies. It is not merely that the BSC's share of the market is smaller. The market itself is smaller, because the BSC's manufacturing customers are themselves going out of business. This is where we must tackle the problem. It is no good putting more and more money into the BSC unless conditions are created in which it can operate effectively. I hope that one day we shall have a full debate on the report on imports and exports produced by the Select Committee on Industry and Trade. We made 29 recommendations, all of which stem from the same basic message. We are not asking for a policy of protectionism. We are saying that British industry should be allowed to compete on equal terms, which is manifestly not the case at present.
Anyone could be forgiven for believing that the Government's policies were deliberately designed to give the maximum advantage to overseas competitors. Some time ago the Prime Minister did a remarkable turnabout on the question of coal industry closures. That problem arose simply because there were 37 million tonnes of coal on the ground and the Government automatically assumed that the NCB was producing too much coal. It was not. The customers were not buying enough coal because of the general decline of industry.
The steel industry is one of the biggest customers of the coal industry. When the steel industry declines it does not buy as much coal because its own customers are not buying enough steel. The problem can be remedied only by a different approach to the management of the economy. It is the economic climate in which all of those industries operate which is causing the problem.
The Government's present industrial policy can only be described as economic lunacy. They persist in running away from their responsibility to ensure fair trading conditions for British industry. They then have to dig deeply into the public purse to pay the price of their own negligence by way of the massive cost of unemployment and periodic rescue operations for individual industries or companies. Another one was announced only this afternoon. Those operations would be either unnecessary or, at least, far less expensive had the Government not neglected their duty in the first place. That is what the hon. Member for Cornwall, North should tell his constituents who complain about being required to contribute to these industries out of their own pockets.
If the economic climate were changed so that industries could operate profitably there would be no need for this to happen. No one in the BSC wants to drag more money out of the public purse. If the BSC was given a chance to operate competitively and effectively in a sound economy, there would be no need for it.

Mr. Neale: Is that something which is peculiar to the last two years? How does the hon. Gentleman explain away the fact that constituents such as mine have had to contribute even when the Labour Party was in power?

Mr. Crowther: The hon. Gentleman referred to the considerable difference in amounts. The other major difference is that in the earlier period that money went almost entirely into investment, as my hon. Friend the Member for Redcar (Mr. Tinn) pointed out.

Mr. Peter Hardy: Perhaps my hon. Friend will remind the hon. Gentleman that the works in his constituency, as well as mine and some other South Yorkshire constituencies, had never been unprofitable until the present disaster. We and our constituents are saddened at the fact that the State must pay enormously to support people who are not allowed to work full time in modern plant which had previously broken world records with unfailing regularity.

Mr. Crowther: My hon. Friend is absolutely right. Rotherham and other works within the special steels groups were, and potentially still are, profitable plants, but they must be given the chance to operate in the proper economic circumstances.
I do not know how the Secretary of State can imagine that the British steel industry, both public and private—however much it is restructured and rationalised—will ever return to real prosperity and profitability while all the dice are loaded against it as a result of the Government's policies.
I am sometimes accused of being over-optimistic about the potential prospects for the steel industry. That may well be due to the fact that I am well aware that in Rotherham and the other plants production records have been achieved many times. We know that they can be achieved if those plants are given the chance. I firmly believe that the publicly owned steel industry is capable of again becoming a competitive and profitable industry and that it can achieve a level of production substantially higher than that proposed in the MacGregor plan.
That depends on what the Government are prepared to do in order to create the right competitive conditions. The Secretary of State has a duty which goes far beyond the mere financial measures proposed in the Bill. I hope that he will soon begin to appreciate that simple point.

Several Hon. Members: rose—

Mr. Deputy Speaker: Order. Before I call the next hon. Member, I remind the House that six hon. Members still wish to speak before the wind-up speeches begin. Long speeches will make it difficult to accommodate all of them.

Mr. Archie Hamilton: I should like to say something about the Keynesian views of the hon. Member for Rotherham (Mr. Crowther). Clearly, if we were to stimulate demand for products steel stocks would be used up, steelworks would to some extent come back into production and no doubt existing coal stocks would be reduced. It is unfortunate that the hon. Gentleman has not learnt a lesson from the experience of the right hon. Member for Leeds, East (Mr. Healey), who, when Chancellor of the Exchequer, accepted that there was a direct relationship between stimulating demand and creating inflation. I have no doubt that if we created the


sort of inlation about which most Labour Members are talking we would in the medium term destroy far more jobs than we ever thought of in the past and create far greater economic problems than we have yet seen.
The Bill, which asks for extra funds for the BSC, is yet another chapter in the sorry tale which has now lasted for some years. British Steel has had to come back to the House to ask for more funds to keep going. These problems can be traced back to the nationalisation and renationalisation of the BSC, which basically changed a number of relatively small companies into a gigantic and unmanageable organisation, which in turn has resulted in its being unresponsive to changes in the market place, indifferent to customer demands and held to ransom by the monopoly unions which, inevitably, control such large organisations.
As a result, the labour force has refused to implement new plant and processes. The industry has also been beset by overmanning. The productivity of the BSC, relative to our competitors, has been bad, and remains bad today. The latest figures for man hours per tonne of steel show that in the United Kingdom it is 11·7, in France, 7·2 and in Germany 6·5, which does not reflect well on the United Kingdom.
The problems of the past were compounded by the actions of Sir Monty Finniston during his time as chairman of the BSC. He introduced an expansion programme which increased the capacity of the BSC to a staggering degree at a time when, in practice, foreign competition was increasing and the steel market was shrinking.
The BSC has been one of the worst examples of nationalisation. It is remarkable that the national executive of the Labour Party is today calling for more nationalisation, especially when we look at the examples that we have which in anyone's mind are disastrous. I do not see how an increased programme of nationalisation would in any way result in increased benefit to the nation.
As always happens, nationalised industries are basically controlled to a large degree by politicians. Therefore, there are political pressures in constituencies not to announce redundancies when elections are looming. For some time there has been a need to run the industry down, and it is a great sadness and tragedy for the people involved that that was not done slowly and gradually over a, period of years.
When my right hon. Friend the Secretary of State inherited this industry, it was in need of major surgery. Last year there were massive redundancies, totalling about 50,000. There are more to come in 1981. It is expected that there will be about 20,000 redundancies this year. The problems were compounded by the 13-week strike, which cost the industry about £200 million. That strike had all the hallmarks of a kamikaze pilot, because it was inconceivable that people should strike for higher wages when their industry was basically bankrupt. It would have been impossible for that to happen in the private sector, because there would have been no way in which the workers could be paid. As a result, these redundancies are now taking place at a time of rising unemployment, which merely increases the human tragedy of the people involved.
As my hon. Friend the Member for Cornwall, North (Mr. Neale) said, the taxpayer has to fund all these activities. During the five years of Labour Government, £2,750 million was put into the corporation. Under this Government, £2,000 million was put in up to the end of

last year. There is now need of another £100 million to carry the corporation through until April 1981, and £730 million to see it through until April 1982. Up to the end of December last year, the corporation was losing £800 million a year—a rate of £30 a second.
If we take £500 million as representing 1p on the standard rate of income tax, without steel losses it would have been possible for the standard rate to have been 1p lower during each year of the Labour Government. During the period of this Government, it would have been possible for the standard rate to have been 2p lower. The resulting reduction in demand may have saved what are basically non-jobs in the BSC, but it has destroyed proper jobs in other manufacturing industries. When it comes to it, I doubt whether it will have saved any marginal seats either.
We cannot always dwell on the past. We must look forward with optimism, and hope that the future holds more than the past, although the picture is not very exciting, with the over-capacity in most European steel corporations, as mentioned by my right hon. Friend. I welcome his statement that the corporation's progress will be closely monitored. We cannot let this one step by. We must from now on watch carefully how the group performs. I am glad that my right hon. Friend has grasped the nettle.
If the group does not perform better, the business will have to be run down. I do not see that as the end of the road, as many Opposition Members do. Out of the liquidation of the BSC a number of ventures in the private sector may rise and have a good future. I am encouraged by the prospect of having separate Companies Act companies in competition with the private sector. I hope that I can count on my right hon. Friend to maintain separate accounting, so that it will be possible to compare the performance of those companies with the private sector. My right hon. Friend's realisation that the corporation may have to be wound up is courageous.
We must give all possible encouragement to Mr. MacGregor. His policy to decentralise is sensible. Almost everyone in the industry recognises that building vast groups with centralised management has not worked Diversifying and decentralising the management organisation can improve management control. It will also improve labour relations in the separate parts, together with marketing and customer relations.
The phoenix projects are exciting and offer enormous possibilities. If they are a form of back-door denationalisation, I support them fully. The future of our steel making lies in the private sector. The taxpayer has already been asked to contribute far too much. He cannot be expected to continue contributing endlessly. Private sector steel making will be much more competitive and productive and offer a far more secure future for people in the industry.
The right hon. Member for Salford, East (Mr. Orme) is worried that the taxpayer will not get a return on his investment if the companies are sold to the pivate sector. To date the BSC has cost the taxpayer almost £6,000 million, so he may well be prepared to forgo his return if he does not have to produce more money.

Mr. D. N. Campbell-Savours: I spoke for 50 minutes in the previous steel debate and made out the case for Distington in detail, so I shall be brief.
It is my party's policy to support the measure, but I am inclined to object. Unless the Government are willing to set up machinery to monitor the BSC's decisions, the public interest is not being served. The Government were prepared to allocate £1,120 million for the trading losses of the BSC last year and are now introducing capital restructuring of the corporation and writing off further moneys. The taxpayer should be able to feel that the BSC's decisions are sensible and that his interests are being protected.
I do not seek to undermine Mr. MacGregor's ability as a manager. I was one of the few hon. Members on the Opposition Benches to support his appointment. However, until he comes to terms with the fact that managers not capable of taking reasonable decisions still hold office in the regions, strategy will not succeed. While such people exist in the BSC, the Secretary of State should intervene to protect the public interests.
The Government have already made U-turns on Leyland and, to a certain extent, on ICL today, when they announced that they were giving further support to the company, having sold it at a high price last year. Many people who bought shares must be shaking with anger. Having allocated vast sums, however, the Government have not yet made a U-turn to intervene in the decision's of the BSC.
The Secretary of State and Ministers at the Dispatch Box and on television repeatedly state that they will protect the public interest when money is expended by the State and that they are determined to ensure that the money is seen to be well spent, yet the Secretary of State remains wedded to the principle of keeping out of decisions made by mammoth companies like the BSC. Mr. MacGregor may be a good manager, and some of the decisions may be acceptable to the whole House, but Workington is a prime example of a decision made by a tier of management of the BSC that does not stand up to realistic commercial assessment.
Even before I spoke in the previous debate the right hon. Member for Taunton (Mr. du Cann) asked the Government to look more closely at the BSC's decisions. Presumably as a result of representations made, the Secretary of State appointed a conciliator, whose function appears to be simply to arbitrate in price disputes between the private sector and the BSC. His role seems to be limited to establishing in minds of private sector producers the fact that the base import price of iron and steel products is fair and that if the BSC is willing to meet the target prices the private sector should do the same. The conciliator should also act in disputes between trade unions and action committees—as at Distington—and the BSC.
In the event that Mr. MacGregor, in his remarks yesterday to the Select Committee, and the right hon. Gentleman the Secretary of State, at the Dispatch Box, are correct, and that there may be a further retrenchment of British Steel Corporation operations over the months to come, there will increasingly be more disputes. It seems that unless the Secretary of State is willing to intervene to ensure that people who dispute the judgments and decisions of the corporation have their cases heard, there will be only further difficulties in the future.
It is not only at my own plant where these disputes have taken place. An argument has now broken out in the courts

over an attempt to put aside the decision to close the Velindre plant on the basis that the unions were not consulted under the 1975 Act. I am told that the referral to the courts might not have taken place had the Secretary of State set up machinery to ensure that people had a right to seek an outside arbitrator in their disputes with the British Steel Corporation.
There is a crying need, especially during this period of retrenchment, for the Secretary of State to provide an arbitration service to ensure that people feel that justice is being done in their areas. I can appreciate the sense of grievance over the position at Velindre. I was born in Swansea. The feelings among people who work at that plant can only be further aggravated by the fact that they are directly affected not only by the Velindre announcement but by the situation at the Llanelli plant of Duport, which also provides work for people from the Swansea area. This shows the great need for the Secretary of State to provide the machinery to intervene where disputes occur.
The right hon. Member for Taunton, supported by some of his hon. Friends, said that the best way to rejig the economy and to reflate to a certain extent would be to set up a programme of public construction. I believe that the right hon. Gentleman mentioned the possibility of the Channel tunnel, or the rebuilding of the construction industry. Those proposals would be highly beneficial to the British Steel Corporation. The true potential of productivity of the British Steel Corporation cannot be established by quoting figures from a European assessment, or an assessment by certain bodies in the United Kingdom when demand has been deflated. The potential of the BSC can be evaluated only in conditions of a reflated economy. The best way to bring about that situation is to enter upon the programme of public construction put by the right hon. Member for Taunton, increasingly supported by his hon. Friends.
Instead of pressing the British Steel Corporation to close plants, a better approach might be for the Government to urge it to retain that capacity, to mothball plants and to give special relief from local authorities where rate liability exists. Where it is clear that plant closures will take place, there is a feeling that the Government should intervene to ensure mothballing, if only to make certain that capacity is retained within the corporation for the time when an upturn occurs.

Mr. John G. Blackburn: This is one of those occasions in the House of Commons when there is little happiness on either side of the Chamber. It would be wrong to say that we are holding an inquest on the British steel industry. It is, however, the case that we find ourselves in a very sad situation. I am sure that the Secretary of State finds no happiness in the fact that his name is attached to the Second Reading of the Iron and Steel Bill, but I believe that he displays a remarkable sense of courage in taking these steps on behalf of the industry.
I should like to deal with the effect of the Bill on my constituency, its impact on the people and its future effects on the steel industry corporately. I am humbled at being the Member for a constituency that is dominated by a steelworks. The steelworks was founded in 1867 by the Earl of Dudley and now stands alone in the West Midlands as a major steel producer. The company was acquired in 1953 by Tube Investments Ltd. to provide a secure source


for the high grade carbon and alloy steels required for the seamless tube-making companies. Its history is interesting.
With the nationalisation of the industry in 1967, the newly formed British Steel Corporation took a half share, along with the Round Oak company itslf. The expression "half share" that is to be produced under the phoenix scheme is familiar to hon. Members. This period of joint ownership has been successful. The owners have encouraged the local management team to enter into a widespread and costly modernisation scheme. As I gaze across the Opposition Benches, I see that there are some who are familiar with that scheme of modernisation and who played a greater part in it than I have done.
A total of £24 million has been invested in this company. That is the background. It has been nationalised. It has been denationalised. It has been renationalised. The investment programme that was produced by the Labour Party when in Government was over-ambitious. Time and again during this sad debate we have had brought to our attention the tragedy of the steel strike in 1980. This was a strike for a pay increase that was not justified because, as has so often been said, the company should have been placed in the hands of the receiver.
Nine months later I was in the Indian Sub-continent. I visited India, Bangladesh and Malaysia. As an engineer, I visited engineering works to see the construction that was taking place. I asked where the steel had been purchased. I was told that until the strike the steel had come from Britain, but that orders had now been placed with German producers. I found no comfort in hearing those words. We had given this valuable export market of one of our basic industries on a silver salver to the competition. There followed a partial shedding of jobs in the steel industry.
I do not apologise for speaking about my constituents and my people. We have been ravaged by unemployment in the steel industry. At the north end of the constituency there was the closure of the Bilston steelworks. At the southern end of the constituency there was the closure of the Cookley steelworks during the administration of the Labour Government. By good management, sound common sense and a wonderful relationship between union and management, which is a credit to the company, the Round Oak steelworks is still in situ. Without that works my constituency would be savaged right across the centre.
Steelworks in both the public and private sectors have shed labour quickly, especially over the past 12 to 18 months. I think that it took courage to do that. Some of them have reduced the total work force by nearly one-third. They will not increase the work force significantly to higher levels for plant utilisation. The gains in the private sector are about £20 a tonne.
I had the opportunity to speak to the newly appointed chairman of the BSC, Mr. MacGregor, prior to the announcement of 19 December. I applaud any man who says that he will sell the BSC's product. That is the voice of a business man who is anxious to develop the corporation that has been placed at his disposal. However, that is not enough. He must declare the market in which he will sell his steel, against whom he will have to compete and the products that he will sell. For example, is Mr. MacGregor moving into tube manufactures or engineering steels?
It is critical for the private sector to know more about Phoenix I and II. I find it unacceptable to be told that we shall have a statement in the autumn. I speak with some feeling, as the steelworks in my constituency is losing more and more money day by day and is paying interest upon interest. It is critical that the decision is made with great urgency so that the private sector knows the exact position and can plan for it.
I do not accept that the private sector is asking for special treatment. Historically, it has never done so. However, it wants parity in finance, financial security, the cost of energy and investment. We have had an opportunity to think about the investment programmes that have been accomplished by the BSC. Investment programmes in the private sector have come from private sources, and the sector is looking for parity.
Can we salvage anything from the Bill that will give us encouragement when we return to our steel making constituencies this weekend? I am pleased to read the phrase "Financial reconstruction of Corporation". I am not entirely happy but the Bill becomes acceptable when I read in clause 3 of £3,000 million. We do not solve the problem by throwing money at it as that will not remove the root cause of the problem.
My remarks are saturated with sincerity. By means of the Bill the House will make £3,000 million available to the industry. The nation is entitled to proper monitoring. It is the nation that is picking up the bill and investing in the corporation. We are entitled to say that we expect this to be a once-and-for-all occasion for a Bill of this nature to be brought before the House. I have a great deal of faith in the steel workers in my constituency and throughout Britain. I pray that they will accept the challenge and the opportunity that will be presented to them tonight when the Bill is given its Second Reading.

Mr. Bill Homewood: I am pleased to be able to take up the remarks of the hon. Member for Dudley, West (Mr. Blackburn). I am not too sympathetic towards some of his arguments but I sympathise with him in the situation in which he finds himself. For a good many years I was a full-time trade union officer at the Round Oak works. It is true that if those works were to close the hon. Gentleman would find himself in exactly the same situation as that with which I am faced in Corby and that faces my right hon. Friend the Member for Llanelli (Mr. Davies) at the Duport steelworks.
I am at odds with some Conservative Members about the steel strike. There can be little doubt that the industry was damaged by the strike. However, we must be careful in apportioning the blame. If any body of workers at that time had been faced with an insulting offer of a 2 per cent. increase in earnings a strike would have been inevitable, whatever the industry or the employment position within it.

Sir Keith Joseph: The hon. Gentleman knows as well as I do that the offer, which was the management's affair, was a 2 per cent. increase plus 10 per cent. to be earned by increased productivity, making 12 per cent. in all.

Mr. Homewood: The Secretary of State and I could carry on a debate about what constituted the productivity side of that offer from now until midnight, and I am sure that we would still not agree about what the BSC meant.


Ultimately, the productivity element that came out of the final deal, as the Secretary of State knows, was much less than 10 per cent.
I want to talk about the industry in general, and the difficulties that we are facing. Labour Members welcome the Bill. We shall not vote against it, because from the point of view of my trade union, anyway, it substantially meets what we have been asking for for a long time.
We are discussing an industry that has shed about 262,000 employees in 13 years—that is 58 per cent. of its work force. Moreover, it is now envisaged that a further 22,000 jobs will go in the public sector, under the so-called MacGregor corporate plan.
As the Secretary of State said in opening, 50,000 jobs were lost in 1980. When I hear some Conservative Members talking about subsidies for rural constituencies I feel somewhat cynical, bearing in mind the vast subsidies that have been given to farmers since time immemorial.
The loss of jobs in the steel industry is concentrated in small areas. Last year in South Wales about 12,500 jobs were lost. In Shotton the figure was 7,250; in my constituency, Corby lost 5,500; in Consett, 3,700 jobs were lost; in Scunthorpe 2,300 were lost; and there were sundry others, making up the figure of 50,000.
In the decade 1970–1980, crude steel production in this country fell from 28·3 million tonnes to 11·3 million tonnes—a drop of about 60 per cent. Even if the 1980 figures were influenced by the strike, if we ignore those figures and use the corporate plan figure of 14·4 million tonnes, we find that the drop in output in the 10 years was 49 per cent.
In the same decade—the strike had little effect here, because it was a gradual change in position over the whole period—imports rose from 3·73 million tonnes to 6·36 million tonnes—in percentage terms an increase from 15·53 per cent. to 39·88 per cent. Imports from the EEC rose from 25·5 per cent. of our total imports in 1970 to 66 per cent. of our imports last year.
During that time, while the British steel worker was thrown out of work and denied wage increases because of over-capacity, what was happening to his counterpart in the Common Market? In the decade 1970–1980, Belgium crude steel production fell by a mere 2·4 per cent.; French CSP by a mere 2·5 per cent.; and West German CSP by a mere 2·7 per cent.; and the Italian CSP rose by 51 per cent.—a matter to which my hon. Friend drew attention earlier today.
The Secretary of State believes that all these difficulties stem from the fact that the industry is nationalised. I do not know how that squares with the contention that we now hear from the Government Benches whenever we have a debate on steel—the contention that the private sector is now complaining that the BSC is being unfairly competitive. I am not sure how far the taxpayers' money subsidy may be used as an argument in favour of private steel production.
Let us consider how the money has been spent over the past 30 years. About £5·6 billion was poured into the BSC in that time, of which £3·6 billion has been invested, £1·3 billion paid in interest, £5·2 million spent on redundancy and £40 million spent by BSC (Industry) Ltd. on job creation. Not a penny has gone on the day-to-day running of the industry, or on its workers' wages.
When my hon. Friend asked whether the phoenix propositions were an extension of nationalisation or whether they were back-door nationalistion, the question was easily answered; it depends on whether they become profitable. If they are unprofitable the public will bear the cost. If they are profitable they will, of course, be sold or given away to private enterprise.
That brings me to my main point. The present catastrophic situation of our steel industry—this was confirmed by what the Secretary of State said in opening—is due to the mammoth investment errors that have been made over the past decade. I am not talking just about incorrect demand forecasting, because that happens in almost every industrialised country. I mean it more in terms of big being beautiful, the Japanese model, and work and productivity arguments, no matter what the cost of the capital equipment. 
I am sorry that the hon. Member for Dudley, West (Mr. Blackburn) is not here, because I believe that the company that he mentioned invested too much money and created exactly the same sort of situation. I believe that capital equipment has replaced labour on the basis of diminishing returns in the steel industry, even if one discounts the unemployment costs at a level of 20 per cent. in Corby, 20 per cent. in Llanelli, 18 per cent in Shotton and wherever steelworks have been closed.
I think that a long look should be taken at our European competitors. My hon. Friend the Member for Workington (Mr. Campbell-Savours) said that the comparisons that are now drawn concerning cost and productivity are difficult on the basis of different levels of activity in the various countries. We have poured about £3 billion into the steel industry over the past decade. To employ a steel worker in this country now costs only half as much as it does in West Germany or Belgium, 50 per cent. less than in France, 25 per cent. less than in Italy or Spain—of all countries—and a little over one-third of the cost in America.
With the massive investment that our industry has received and its enormous labour costs, it is impossible to argue that the import difficulties are based on fair competition. The subsidies on fuel, coking coal and transport in other countries play a substantial part in our difficulties.
It is obvious from the figures that we need only a marginal upturn in economic activity to put our steel industry in an impossible position in relation to helping the balance of trade. The industry has difficulty in producing the crude tonnage allowed under the EEC quota. I find it difficult to listen to Government Members. They are extremely defence conscious and yet they talk as though they would not mind if no bulk steel making were left in Britain. I hope that the Secretary of State will apply his mind to that and see whether he can find better answers.

Mr. Tom Ellis: I apologise in that I shall not be able to be present when the Minister replies to the debate. My absence will be unavoidable.
This has been a sad debate. I felt that we were experiencing the funeral rites of the British Steel Corporation. We do not have a corpse, but we have a patient on a life support system. There is a sombre air about the House. The conventional stimulii have not provoked the usual Pavlovian response. When reference


is made to nationalised industry or free enterprise everybody accepts that we are in extremis. The Bill is accepted as a last resort.
The steel industry has failed the country. I do not blame anybody. The job of all politicians it to be realistic. The failure should not be measured by comparisons with European Community countries in the last few years. The citizens of Britain should ask how it was that in the early 1950s we produced 28 millions tons of steel and Japan produced 2 million tons whereas now we produce about 1 million tonnes and Japan produces 90 million tonnes. That is a good question which cannot easily be answered. Any answer will be complex, especially since Japan is an island with no coal or iron ore.

Mr. Hooley: I can give three answers. The first is the low value of the yen which has been deliberately maintained for years. The second answer is the massive and continual high investment in steel making capacity in Japan, which we did not have in Britain. The third is Japan's rigorous policy of keeping out foreign imports that it did not want. Those are the three classic ways in which the Japanese developed their industry.

Mr. Ellis: I regret that the hon. Member did not give us the benefit of his experience earlier, so that we could be producing 90 million tonnes this year. The hon. Member over-simplifies the problem. Japanese workers receive wages worth about 50 per cent. more in real terms than British workers. We tend glibly to put many issues on one side. We have to accept the Bill. There is little else that we can do. The only good that will come out of it will be a few lessons about industrial problems generally.
Management must bear its responsibility. In normal commercial enterprises, management is responsible. If a firm goes bust, management is to blame. However, the issue is more complex in the steel industry. However good or bad management is, it does not have the same responsibility as it has in private industry. Politicians tend to intervene. If there is a lesson to be learnt from the last 30 years it is that if responsibility lies other than with management it lies with this House.
Tonight hon. Members asked to see the corporate plan as if they were to run the steel industry. Only two or three years ago a parliamentary Sub-Committee demanded that the then chairman of the BSC should explain why he had miscalculated the losses that the corporation was due to make. I said at the time that the Serjeant at Arms should have marched him at sword point down Whitehall so that the whole world could see how we go about the business of running the steel industry. For two hours parliamentarians scrutinised the affairs of the British Steel Corporaion. After two hours with the chairman, politicians thought that they could put everything right. That is a travesty of the truth. The capriciousness of intervention demonstrates that many lessons have still to be learnt.
My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) talked about accountancy technicalities and asked whether the assets to be written off had been valued correctly. In the light of what has happened for 30 years and of the enormous influence that we have had, I could not help but feel that his arguments were a little specious. Indeed, his main argument was about the economic situation. Much is wrong and much blame must be attached to the Government, but we are dealing with

the steel industry. Even if the economy improves overnight, the organisaion and well-being of the steel industry is a separate matter.
I shall give an illustration. The Secretary of State said that we were talking with the benefit of hindsight about the market. However, in 1973, some voices pointed out that a figure of 35 million tonnes was not on. Some hon. Members even talked about 45 million tonnes. I do not wish to be immodest, but I remember that when a lobby came from Shotton steelworks in 1974 all hon. Members made the same speech. They said "Good lads. Backs to the wall. Man the barricades." One could almost see the machine guns being set up around Shotton. At the time 1,700 of my constituents worked at Shotton. I told them that they would not sell even 23 million tonnes let alone 35 million tonnes.
President Nixon had suspended dollar convertibility in 1971. The situation was obvious and yet politicans were arguing for a 35 million tonnes share of the market. The sheer irresponsibility of that stuck in my throat. I told my constituents "Look, you would be better off to accept." Today I believe firmly that they would have been better off if they had rejected the advice of all the politicians and accepted the advice of just one. I do not pretend to be an expert, but it was blindingly obvious. I could not understand how politicians could say that we should aim for 35 million tonnes or 45 million tonnes. They plucked figures from the air. That is not shouldering the responsibility of one's job in the House. Therefore, all sorts of lessons are to be learnt.
The hon. Member for Sheffield, Hillsborough (Mr. Flannery) talked about the Brymbo steelworks. He spoke about it on television—on BBC 2, if you please. So he really knew about it. I played a modest personal role. The facts were contrary to what the hon. Member said. For a long time, British Steel valued the works according to a valuation by its financial department. GKN had the works valued by a merchant banker and the discrepancy was enormous. GKN said that a figure produced by any merchant banker anyone cared to name should be settled on. It said that it would accept whatever figures resulted. In the event, the deal went through after the death of the former chairman of British Steel. The works have just finished investing £49 million in the steel industry.
At that time, I was severely criticised by my constituents because I was trying to obtain something for free enterprise. The argument about free enterprise versus the nationalised industries is a sterile one. Some industries should be nationalised and some should be privately owned. All sorts of complex questions are involved. However, simply to rear up on one's hind legs and say that one industry should be nationalised and another should be private misses the point.
At that time, my duty was to try to safeguard the future of those who were employed at Brymbo. Brymbo did well but now, because of the economic crisis, it is in difficulties. The firm has sacked 600 people out of a total labour force of about 2,400 during the last few months.
Brymbo steelworks has electric arc furnaces and is a major consumer of electricity. In April, there will be a 16 per cent. rise in electricity charges. The chairman of the works says that that is crucial. He is a good chap and I believe what he says. He says that, as a result, the works could finish. He desperately pleaded with me to use whatever influence I could with the Government to see


whether something could be done about the electricity charges. The same applies to many industries. I hope that the Minister will be able to do something about it.
The issue is not wholly concerned with economics, as the hon. Member for Motherwell and Wishaw said, although that matter is relevant. Nor is it concerned with technical accountancy arrangements, although, again, those are important. It is as if a patient were on a life support system and one either raises or lowers the purity of the oxygen content. An important decision has to be made, but the patient is still on a life support system. The real issues are much more profound. Essentially, they concern the political structure of the country. No one should make any mistake about that. The political governing system of nationalised industries is in the balance tonight. That is an illustration of what has gone wrong. That system is completely outmoded. If we learn that lesson from the Bill, we might go into the next decade with more confidence than we have had over the last 20 or 30 years.

Mr. Anthony Beaumont-Dark: I apologise for missing the last hour of the debate—I was on other parliamentary duties—but I have heard much about what has taken place this afternoon. I am pleased that I heard the hon. Member for Wrexham (Mr. Ellis), who spoke much common sense.
I do not believe that all money given to State industry is a sort of evil. There are times, when one is talking about great and structural changes that must take place, when one cannot say that if the industry cannot make a profit nothing should be done, or that it should not be run. For example, there is a good logic that railways and the railway system are of great and abiding importance to a country such as ours.
The same applies to the steel industry. I do not look upon all money that we spend on the steel industry as if it were a wicked waste. It is true that every time one puts a subsidy into an industry, someone somewhere has to be making a profit for that money to be spent. However, I thought that the hon. Member for Wrexham was right when he said that very often, with the best intentions in the world, politicians tend to spoil industry. The good intentions for the steel industry and the people who work for it have paved the way for the thousands of millions of pounds that the people in this country have had to put into steel.
Since the corporation was set up more money has gone into it than it took to fight and pay for the whole First World War. That must be an incredible proposition. Perhaps more incredible is the fact that we have ended up with a steel industry in a greater crisis today than when steel nationalisation took place, with all the optimism that existed at the time. One of the greatest problems that faces the industry—this is one of my great worries—is that which arises from the fact that we were concentrating on the problems of the nationalised steel industry and some of us felt at the time that it was to the exclusion of the real and even more telling problems of the private steel manufacturers. Other hon. Members share that worry.
I should like to place on record my personal thanks to the Secretary of State and the Minister of State for the tremendous amount of time and effort that they have put

into talks about the problems that face the private steel makers. The outcome of Phoenix I—although I think that GKN will not look upon it as a great victory—avoided a situation that was not of its making. The new system has the making of a genuine and proper wire, rod and bar industry, which can and will prosper.
Those who are against public money say that they do not care what good comes out of that money and that they have put enough in. They consider that if the industry cannot prosper immediately it should be bankrupted. One cannot talk about great enterprises and hundreds and thousands of jobs in that cavalier fashion. We must consider each matter on a more long-term basis.
I have no political or other objection to spending the people's money on building a better, more viable and prosperous industry, as I hope it will be in the end. That does not apply only to steel, but it is steel that we are discussing tonight. Mr. MacGregor must come up with the goods, in view of what we are paying. If he can ultimately produce a genuinely viable steel industry—and I believe that he can—in which the private sector can play its vital and profitable part and the great steel-producing BSC can also play its part, the thousands of millions of pounds that have been invested will have been worthwhile. I am positive that, ultimately, no country can afford to place itself hostage to Europe, Japan or Korea. We need a steel industry. The pains that we are suffering now are reducing the steel industry to a sensible and viable whole.
Phoenix II will probably cause more troubles. I hope that the same good sense will apply to those talks as applied to the talks on Phoenix I. It will be a tragedy if the Llanelli works have to be closed, but it would have been an even greater tragedy if Duport, as a private company, had had alone to bear the burden of all the loss involved. Once again, I pay tribute to the Minister for his work in that area.
The problem faced by the private steel makers—although they produce only 20 per cent. of the total steel capacity in Britain—is the sense of mistrust and distrust built up over the years that almost naturally exists between private manufacturers and the State. That is not unusual. A private manufacturer faces the bank manager every Friday, wondering whether he will meet his bills. State industries face the bank manager when the Minister says that they must, but at the same time they know that he will pick up the bills. There is a natural feeling that the one can do so much better than the other.
I applaud the imaginative concept now being put forward that we will pluck out and set up, almost as separate identifiable entities, those State companies that compete with the private sector. That is the right thing to do. I have received correspondence after correspondence from intelligent and hard-working business men continually saying that the BSC' s Stanton and Staveley plant, or some other plant, has been competing unfairly. If that could be proved not to be so—if it could be proved that the one is competing fairly with the other—it would be good and proper.
The optimistic plan is that British Steel will cost another £730 million. The pessimistic plan is that it will cost an additional £432 million on top of that. I wish British steel well, meaning not only the BSC but the whole identifiable mass of the steel industry—both private and State. We need it because we need the jobs, the prosperity and the exports that it brings. Knowing the Minister as I do, I am sure that he will be bold and blunt in his talks with the EEC


on the manifest crisis. Never has anything been better named. There is a manifest crisis in the steel industry not only in Britain but world-wide.
Steel was built on the idea that, somehow, the Western world would grow and grow and grow. It will not now do that. It cannot do so, because of the price of oil. The Arab countries do not need our money. They can afford to keep their oil. Every time that we, as the Western world, appear to become more prosperous and need more oil, the Arab States raise the price of oil and cut back our prosperity and growth. We must live with what we need. If we can achieve a steel industry that produces 10 million, 11 million or 12 million tonnes instead of the 28 million tonnes that it produced in 1950, if it can do that well, and if the industry is run properly it will result in good steel jobs, and a good investment for Britain.
The money that we lose now does not matter so much. What matters is that we grasp the reality of the position, namely, that we in the House cannot produce steel. With the best of intentions, we cannot produce steel at Merthyr Tydfil simply because tens of thousands of people have nothing else to do. We must produce a good and viable industry. If we do that, other industries and jobs will grow around it.
Change is not painless. The trouble is that we have told people that it can be. If the debate about the new crisis facing the British steel industry has shown us anything, it is that somehow or other the House—we, as politicians—must make people face the truth. I believe that they can do it, provided that we can do it.

Mr. Frank Hooley: I do not necessarily regard this as a tragic occasion or as some sort of funeral or wake. The reconstruction of the capital of the British Steel Corporation is very important. It is overdue. We are considering a great public corporation, with a capacity to produce real wealth to the value of £3,000 million. That is the value of the turnover of the BSC. If people talk airily about liquidating, they must explain where that wealth will come from, or what we shall export to buy the equivalent amount of steel from abroad if we intend to run down this huge operation, with all its magnificent assets and its highly skilled work force.
The British Steel Corporation has superb assets. We have a highly skilled work force and a very good management. I object to the sneering and jeering about British Steel's management, because there are many dedicated and highly skilled men in the BSC who have worked extremely hard at building up their sections of the enterprise, and have done it with great success under considerable difficulty.
There has been much talk about profitability. Until the present Government came into office, the special steels division at Sheffield made a profit year after year, so there is no question of its not being profitable. The present economic climate and the economic policy pursued by the Government have created two-thirds of the difficulties.
The first message that we have to get across is that in no circumstances must the capacity of 15 million tonnes be cut further. This business of cutting back and back must stop. The capacity must be preserved. The closing of steelworks such as Shotton, Corby, Duport and the others must be halted.
The Government have tried to argue that there is an inexorable decline in the British steel industry. Perhaps

they can explain why Germany has not slashed its steelmaking capacity by 50 per cent. and why France, Japan or the United States have not massacred their steel-making capacities. In Italy and Spain, far from cutting capacity and production, those were increased in 1980. In spite of the so-called world depression and the economic forces that we cannot resist, we find that other countries have adopted policies that have made their steel industries flourishing and viable. Of course we know that they are working below their full capacity, but they have not destroyed capacity on the scale that we have, and for good reason. Steel is a basic industry fundamental to the economy of any advanced industrial country.
Therefore, the message must go out, and to Mr. McGregor above all—I believe that he is anxious to hold to the capacity that he has—that there must be no further cutbacks and that we are determined to maintain the capacity of 15 million tonnes and build on that a steel industry that can expand in the future.
I should be interested to know how the Government are approaching the European negotiations, which I understand will take place in May or June, about future quotas and allocations. I do not know whether I am correct, but I have been told that the Germans do not wish to participate further. They want to go their own way and do their own thing. I want to know whether the British Government will tamely accept some diktat from Brussels that we should cut back because we have too much capacity and that the capacity must be lowered to 11 million tonnes, 10 million tonnes, 9 million tonnes or whatever is decided by Brussels. That would be unacceptable. I am sure that it would be unacceptable to Mr. McGregor, and it is unacceptable to the House.
We are entitled to be told on what basis the British Government are going into those negotiations. No doubt they will say that the detail is a matter for private discussion, but are we prepared to say that we are willing to shed another 4 million tonnes or 5 million tonnes? As I understand it, the agreement runs out at the end of May or June.
We are constantly being told that world demand for steel has slumped. I do not believe that that is true. I think that there has been a slight decline in the past couple of years in world steel usage and world production—possibly about 10 million or 15 million tonnes from a total of about 790 million tonnes—but it is simply not true that there has been a massive slump in world demand for steel, and that is not the explanation for the present situation in Britain.
Why is it that the British steel industry has run intro these difficulties in recent years? We know that in other countries coking coal has been subsidised. We know that freightage and the railways in Western Europe receive public subventions on a far greater scale than anything that we give in Britain. We have had reference to energy prices and costs. We know that these are serious problems in steel making and that they have been aggravated by deliberate Government policy. There are some signs that, under massive pressure from the CBI and industry, and from the NEDC and other bodies, the Government are modifying their attitude on the question of energy prices. However, we ought to be assured firmly tonight that this will be a real change that will be of help to the steel industry, and that we shall see some move in that direction.
Another problem is interest rates. The Prime Minister boasts that she has brought these down by four or five points. That is certainly welcome. It was long overdue.


High interest rates have caused massive problems for the steel industry over the past two years. Unless the process of reducing interest rates is continued, matters are not likely to improve in that direction.
The exchange rate has also been mentioned. I have seen figures produced in Sheffield on this matter. They show the appalling effect of the rate of sterling on the cost per tonne of certain special forms of alloy steel. This is an impossible burden for the steel industry to carry if it is to compete abroad against other producers. Therefore, the Government owe us some explanation of those matters. Is there to be a genuine effort to reduce energy costs? Will interest rates come down further, and quickly? Is a serious effort to be made to bring the exchange rate down to a more reasonable level?
Then there is the question of the reorganisation with the private sector. Obviously this is a matter of considerable concern in Sheffield, because there are certain major private sector steel making firms that are in desperate trouble and would like to know what is going on in these phoenix operations.
I inquired the other day about the extent to which the trade unions that would be involved in these matters would be consulted. The Secretary of State brushed off the suggestion that the trade unions had any right to be consulted. That was an astonishing attitude from my point of view. Shareholders, the banks, the institutions, investors and managers have had a say in what is going on, but the people whose livelihood is involved are to be shut out; they are to have no say. Apparently they cannot be trusted with being told what the arrangements are to be. These are the people who will be most directly and severely affected by reorganisation plans as between the public corporation and the private sector.
I have no special objection to a reorganisation involving public capital and private industry. I think that what is now happening is that the Government are using the BSC as a substitute for the National Enterprise Board to strengthen or shore up certain private steel companies. I should have no objection if that would save jobs and make viable those private companies that would otherwise collapse. Rationalisation between the public and private sectors is probably overdue. I see nothing fundamentally objectionable in that, provided that if public and private assets are merged in some way there is fair and proper public control of them. After all, the taxpayer has paid for them.
I was interested when the Secretary of State said that, although the BSC held a 50 per cent. share in the Phoenix I reshuffle, it would have no control. The Secretary of State or the Minister should explain why the public sector has no control when there is a 50 per cent. public stake in a reorganised company. Who represents the taxpayer? In what way are taxpayers' interests protected? I would understand if the public had a minority stake of 20 or 25 per cent. The position might then be different. However, I understood the Secretary of State to say that there was a 50–50 share. That suggests that control has passed out of the hands of the BSC. The Government should explain how public investment is being protected and controlled, and what responsibility the Secretary of State has.
The House should also be told what progress has been made on the so-called Phoenix II discussions. We know that private firms are queueing up to knock at the Secretary of State's door for help. They want to know how they can

be saved from toppling over the brink in such an economic climate. The problem is particularly acute in areas such as Sheffield, where many companies are running into serious trouble. If it is possible to rescue those companies and to keep them afloat through some form of reorganisation between the BSC and the private sector, action should be taken. However, the House is entitled to know on what basis such action would be taken.
If there is any reorganisation, how will the public interest be safeguarded? Who will exercise control on behalf of the taxpayer and the public? The Government's overall economic policy is responsible for two-thirds of the steel industry's problems. Deflation, the cut in demand and the monetarist policies that the Government have pursued over the past two years have had a disastrous effect on powerful, enormous corporations such as GKN and ICI.
Thousands of smaller companies that are not so famous cannot survive the blizzard. Therefore, we need a change in the economic strategy.
It is important to know whether the BSC's capacity to produce at least 15 million tonnes of steel a year will be protected, and if necessary enhanced. In addition, we want to know about the reorganisation plans in so far as they affect the private sector.

Mr. Roger Moate: I apologise for coming into the Chamber at this late stage. Indeed, I have been able to attend only because the Standing Committee on the Transport Bill finished earlier than had been expected. Therefore, I apologise if I repeat arguments that have already been made, or make points that have already been answered.
I was privileged—if that is the right word—to hear the speech made by the hon. Member for Sheffield, Heeley (Mr. Hooley). With respect, he is living in a fool's paradise. He argued for massive subventions to the public sector on a European scale. He referred to transport and to the steel industry. Where does he think the money for the Bill will come from if it does not come from individual taxpayers or from the wealth created by private industry.
My main desire in speaking today is to emphasise to my hon. Friend something that he has already heard very often from the Government Benches—the strength of feeling that exists generally throughout the country that there is a limit to how much support we can continue to give over and over again to the public sector. At a time when private companies are going bankrupt, the hon. Member for Heeley should understand the strength of their feeling when they see what the State-owned companies can achieve. They can simply go along to the Secretary of State and be bailed out to the tune of the sort of figures we have got in this Bill today.
It makes no difference to the employees whether they are employed by a nationalised industry or a private sector company if they are declared redundant or their employer is going bust. If they are going to lose their jobs they, too, deeply resent the fact that others are being bailed out while they are going under. It is one of the welcome signs from many Opposition Members and, I hope, from hon. Members on this side of the House that during the recent debates on the steel industry there have been fewer arguments about the public sector versus the private sector; there has been a general desire to protect the steel industry and to try to ensure that a steel industry, both


public and private—though personally I would prefer it to be mostly private—will emerge from this present crisis. I hope in a few moments to turn to the future, because that is really what the Bill should be about.

Mr. Hooley: Where does the money come from? Does it make more sense to pay £7,000 million to keep 2½ million people doing nothing or to put £7,000 million into productive industry in order to create jobs?

Mr. Moate: I was just going to agree with the hon. Gentleman, but now he has taken me back to a point of fundamental disagreement. It is no good having people producing steel that nobody is buying. It is the hon. Gentleman's quite clear contention that the crisis today is a British crisis, generated by the policies of this Government. Has he missed the point that this manifest crisis—that is not a British phrase, although the words are English—affects the whole European situation; that it is the whole of European industry that is in a state of manifest crisis, with a few exceptions? It is on a European dimension. I will not go into all the other economic facts of life that are grimly staring in the face Belgium or Ireland, or other nations that have very different sorts of economic policies.
We are in a recession. It is certainly a European recession, and I would say that it is a world-wide recession. The hon. Member for Heeley tries to pretend that it is somehow created by current policies here, but he knows full well that he is indulging in a little dogmatic party mud-slinging, and that really does not help us at all.
The hon. Member was right in saying that he did not feel that this was in any sense a funeral, or a wake. Indeed, if every capital reconstruction of a State industry were a funeral these corpses would be being buried over and over again, because this is by no means the first time that we have engaged in a capital reconstruction of this kind. It is a realistic thing to do. I have said before that it is utter folly, year after year, to leave many of our State-owned corporations paying interest charges on totally unrealistic capital debts. We have to do this; we have to face it, and what we are now doing, in the words of the Secretary of State, is dealing with the mistakes of the past. The great point is that when the State makes a mistake it makes it on a mighty scale. Here we are writing off £3,500 million of taxpayers' money that has been lost.
I do not want to be ideological or dogmatic about private or public ownership, but I would say to right hon. and hon. Gentlemen that had the steel industry never been nationalised the taxpayer today would not be involved in writing off debts of this kind. It is possible that the steel industry would not have expanded to the point that it did. I concede that. But nearly everybody now concedes that the plans of the time were totally unrealistic. To talk about 35 million, 40 million or 45 million tonnes capacity was to live in the dream world of politicians, and not the real world.

Mr. Crowther: Does the hon. Gentleman recall the Benson report, which preceded nationalisation and which clearly showed that the investment plans of the then private steel companies were totally inadequate to meet the level of investment needed? But for nationalisation, that investment would not have taken place and the British steel industry today would be largely dead.

Mr. Moate: I recall the many years of being lectured about the inadequacy of investment levels, but in the end

the test of adequacy is whether people are prepared to put up the cash to produce a viable industry. The very fact that the taxpayer had to step in to carry out the theories of the report demonstrates the strength of my argument.
Surely we are all agreed that we must have a viable steel industry. It will be smaller. Even the hon. Gentleman said that we would have to stick at 15 mililion tonnes. The difference between that figure and the 14·2 million or 14·4 million tonnes is not of fundamental long-term significance, the latter figure, I understand, being that adopted by Mr. MacGregor and the BSC. We are talking of a viable steel industry, be it publicly or privately owned. That means that there must be a reasonable rate of return on the capital invested, whether by the taxpayer or the private sector.
We do not want any more long-term public involvement that will repeat the mistakes that were made in the past. Today we are footing the bill for yesterday's mistakes. The hon. Member for Wrexham (Mr. Ellis) spoke of the failure of the steel industry. The steel industry has not failed Britain, it is the politicians who have failed the steel industry by nationalising it in the first place.
I will try not to be too ideological. Ownership is about financial control and making sensible investment decisions that will produce a viable industry giving a healthy return. We have only to see what has happened in the private sector in the past five or six years. It has produced profits of £700 million at a time when BSC produced about one and a half times as much as that in losses. It can he done. Had the industry been in private hands the taxpayer would not be having to pay this bill today.
I want to take up with my hon. Friend the Minister of State a few key points. I want him to explain the extent to which the BSC will separate off those parts of its business that are seen to be viable and can be free-standing companies competing without subsidy. I do not know whether we have been given that information or whether it is part of the corporate plan that is still rather elusive. I regard it as part of the key to the future.
We are in a terrible situation and we want to see the way out. It is not a funeral. We are recreating a viable and profitable BSC for the future, I hope, having in two or three years' time no public money in annual subsidy. Let us hope that we can talk less of the desperation of today and more of the prospects of tomorrow. Let us think more optimistically about the MacGregor plan and the private sector.
I would like to hear my hon. Friend tell us that a substantial slice of BSC will be separated off and ultimately privatised or denationalised. Admittedly that will leave parts of BSC that might need support for longer, but in the end those parts, too, should be privatised and the disciplines of private capital and the private sector applied. Will my hon. Friend tell us more about those proposals?
I was very impressed to learn from the recent statement on the coal industry that the Government were to deal with the question of coal imports. We were told in an earlier debate about BSC that its pricing policy was based upon the price levels of imported steels.
As we have pretty well entirely destroyed the free market for steel, a similar argument could be applied to steel imports as to coal imports. If my hon. Friend has time, I hope that he will deal with this question. If the EEC can work out a quota system on production, as it did—a system that may well be renewed—I do not see why it


cannot work out a quota system, within the Community rules, for steel imports. That might give the breathing space that the private and the public sector need at present. I should be grateful for my hon. Friend's comments on that, too.
On pricing policy, Mr. MacGregor undertook personally to investigate any accusations of unfair price cutting or undercutting of the private sector through taxpayer subsidies. I expressed scepticism about that at the time, and I do so again. According to today's papers the BSC is losing £2 million per day. If the Corporation is losing that much money as a generality, I cannot see how it is possible to identify the way in which the taxpayers' money is being used. I am therefore sceptical about Mr. MacGregor's abilty to prove that the money is not being used to undercut private sector products. I believe that the House is entitled to seek a more specific way of dealing with those complaints.
I must ask my hon. Friend once again about energy prices. The steel company in my constituency asserts that it is paying about £9 million per year for electricity while its Continental competitors are paying about £6 million on a comparable basis. That is an additional burden of £3 million being carried by that company. The Chancellor of the Exchequer has made announcements about ways of relieving the burden of electricity costs on intensive energy users. I have given a classic example. I should like to know more clearly how the new system will work and how it will help the whole steel industry, but particularly the type of example to which I have referred.
Many of us have criticised the Government for the way in which they seem to have been supporting the public sector at the expense of the private sector. In doing so, we have perhaps been unfair, in that the Government really had no choice. They had their backs to the wall. No one could really argue that they could have done anything but give the BSC the support that they gave, although many of us said that they must then meet the consequences of those policies. In other words, if they distort the market to that extent, they must offer help to those who suffer the consequences.
It is nevertheless only fair to congratulate the Government upon the courage with which they have faced some of the roughest, toughest and worst decisions that any Government could have to take. Bearing in mind the views of my hon. Friend the Minister of State and my right hon. Friend the Secretary of State, I believe that the praise should be even greater. If we sometimes vent our criticism forcefully, it is because we feel strongly about the need for survival of the private sector, which in the end will be the long-term guarantee of jobs for much of our hot steel industry.
In asking my hon. Friend to keep up the pressure on the Government to find solutions to the problems of the private sector and the public sector, I end on a note of optimism. We are at the depths of a recession. Both sectors have encountered fearsome difficulties. Let us hope that the Bill before us is not, as the hon. Member for Heeley suggested, a funeral or a wake but the basis of a new beginning, and that in a year or two, when we are out of the recession and growth has started, we shall have a profitable, viable and substantial steel industry, which will produce the steel that we need and provide security and jobs for the many people employed in both sectors.

Dr. M. S. Miller: On a number of occasions the hon. Member for Faversham (Mr. Moate) repeated his faith in the private sector of the steel industry. He also said that we are in a deep recession. It seems to some of us that when things are going well the private sector in most industries does well, but when the going gets rough it tends to run away.
As my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) pointed out, one of the reasons for nationalising steel was due to the necessity to pump more into the industry to produce more steel. The hon. Member for Faversham said that we were in a recession. I believe that we are in a depression. He merely stated the truth. However, when we see that recession, or depression, emasculating one industry after another, do we sit back complacently and preside over the total annihilation of other industries or do we make a comprehensive effort to save them?
I realise that I am not speaking for one of the great steel towns, but I appreciate the tragedy of those towns. It is a tragedy for people in towns such as Corby, Shotton, and to some extent, Sheffield and Motherwell, which is near my own constituency. I make no apology for intervening in this debate, because many of my constituents work in the steel mills of Motherwell. In any case, all of us who represent industrial constituencies are involved in what happens to steel.
We indulge in platitudes when we constantly talk about the rundown of British industry. The hon. Member for Faversham said that we should try to make up for the many mistakes of the past. At one time, we were the only country that produced the goods that nearly everyone now produces, and we must accommodate ourselves to that fact.
The Secretary of State for Industry indicated today that this was pretty well the last chance for the BSC. So be it. But it indicates the necessity on his part to keep this industry going. Although there is an over-capacity in most of the industrial countries of the world, we must accommodate ourselves to the share of the goods that we can produce. We must not allow ourselves to be browbeaten, inveigled or hammered into giving up and letting others produce what we should produce ourselves. That goes for steel, just as it applies to many of the other industries that are currently under threat.
Steel used to be, and still is, an index of a country's industrial power. Some of the developing countries have taken that dictum to heart. They are also trying to produce steel. If it is an index of our industrial power, it ill-behoves us to give up the part that our industry can play without a fight.
It is a tough world, which is getting tougher all the time. The developing countries, as well as the other industrial countries, are now able to produce goods of which we had the monopoly at one time.
I do not object to having a certain element of private sector involvement, if the private sector wishes to play a part in revitalising the steel industry. But the industry requires the injection of large sums of money. We are asked where the money will come from. We could better spend the money used to keep a large number of people unemployed on aiding production. We must look beyond the next year or two in revitalising many industries. The steel industry will play an important part, as the Secretary


of State indicated, so we must hold on to it. Through the public sector we have the authority, power and industrial muscle to help industry to re-enter the race for markets all over the world. We must hold on to what we have. Many people would be willing to grab what we relinquish.

Dr. John Cunningham: In this debate we have discussed not only the proposals in the Bill but what we know of the corporate plan, Mr. MacGregor, the new chairman of the BSC, the industrial recession raging around us, the influence on the industry's prospects of the Bill and the plan, prospects for investment in other public and private sector industries, and the situation in the EEC generally. We have also discussed the proposals in the Community for a European restructuring of steel. The debate has been important and wide ranging.
We welcome the proposals for financial restructuring of the corporation, so we do not propose to divide the House. To fit in with their philosophy, the Government have cleverly included other provisions hi the Bill such as that to terminate the statutory duty of the corporation to fulfil the market. The Bill also includes proposals on disposals. The Secretary of State is taking power to instruct the corporation to dispose of assets. The great non-interventionist is taking yet another power to intervene, despite his protests to the contrary. As my right hon. Friend the Member for Salford, West (Mr. Orme) made clear, we oppose the latter proposals and in Committee we shall be moving amendments.
Turning to the Secretary of State's attitude to public industries, as my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) said, it does not make sense to mount a massive financial reconstruction of an industry and almost in the same breath to speak in terms and tones damaging to the morale of the people in the industry. That does not make any sense to the Secretary of State or to anyone else. If he intends the corporation, however slimmed down or changed, to succeed, he ought to be speaking in terms that at least help morale in the industry. I am talking about the management. The man the Secretary of State appointed, Mr. MacGregor, has made this point. Other appointees of the Secretary of State in public sector industries make the same point. It is in the Secretary of State's interests, as well as the interests of the industry, that an attempt should be made to improve morale. Nowhere is that more true than in the British Steel Corporation.
I hope that the Secretary of State will in future resist the temptation to indulge his tendency to denigrate public enterprise. Whether he likes it or not, within his tenure of office—I do not speculate about how long or short that may be—he has to go on dealing with significant public sector industries. It is not in the country's interests, nor his, that morale should continue to be damaged and eroded whether from the Government Dispatch Box or by comments from his right hon. and hon. Friends on the Back Benches. That is an important point.

Mr. Richard Page: I take on board what the hon. Gentleman says. I hope that he will express a view that the ISTC, particularly in its publication "The ISTC Banner", should be publicising support and encouragement for the plan so that a confident work force can help to make the plan succeed instead of the virulent attacks that are at present being published.

Dr. Cunningham: I listened to the hon. Gentleman's speech. I had taken note of the point that he made, which was similar to the point he has just expressed. I assure him that I shall come to that matter. I recognise that there is some importance in what he says about the attitude of the unions towards the future of the industry.
I should like to say, in regard to the speech of the Secretary of State and the speeches of some, although not all, of his hon. Friends, that the steel communities and the workers in the industry need no lessons from any quarter of this House about facing the realities of the industrial situation in Britain. The steel communities and the unions representing people in the industries know the reality. More than anyone, they have felt the damage that has been done and sustained by themselves, their families and their communities. It ill behoves hon. Members, especially the hon. Member for Cornwall, North (Mr. Neale), to make the kind of speech that the House heard about the steelworkers and the communities in which they live.
It is a simple and long-established fact that productivity in any industry is primarily determined by output. The steel workers want to be as productive as any of their competitor companies, whether in the private sector in this country or elsewhere in the EEC. It is extremely difficult, if not impossible, with the best investment and with the best plant running so far below capacity, as is the case in some of our plants, to make meaningful comparisons about productivity with our competitors abroad or in private sector industries. A lot of nonsense has been talked in criticism of the workers in the industry.
The Secretary of State made a curious speech. He began by talking about privatisation. I suppose that he wanted to maximise his political position. He talked about the disposal of assets and the withdrawal of the corporation from certain operations. I assume that he was referring in part to the powers that he will take to direct the corporation on what it must do. That is a curious position for the right hon. Gentleman of all people to be taking. He has appointed Mr. MacGregor, who has an aggressive business record, to take control of the corporation. There is a tremendous conflict when the right hon. Gentleman appears to be taking power for himself. I assume that he will use it as he has done with the NEB and in other circumstances. That is a conflict. I shall return to that theme in referring to certain provisions in the 1975 Act.
The right hon. Gentleman talked about the capital reconstruction of the industry which, as my right hon. Friend the Member for Salford, West said, we greatly welcome. It is long overdue. It has not made sense for the industry to continue carrying unrealistic burdens. We all knew that sooner or later there had to be a capital reconstruction if we were to make any sense of the corporation's industrial position, so the proposal is welcome.
The industry lost 50,000 jobs in 1980. The MacGregor proposals envisaged at least a further 20,000. That is one of the reasons why we are sceptical about the proposals contained in the corporate plan in conjunction with the Bill. We are not convinced that continual rundown will save the industry. The right hon. Gentleman and Mr. MacGregor have said from time to time that the industry will be run down to such a point that it becomes profitable. There is little profit for anyone in taking that view. One would not have to be a genius to reduce the corporation to a size when it could be said "This plant will be viable". It could be done with significant sections of the industry


in Sheffield or Rotherham. However, that would not be in the taxpayers' interest. It would be against their interest and against the national interest.
Demand for steel is likely to fall again in the next 12 months. That will make the achievement of the MacGregor proposals difficult. Although we say that we shall oppose further closures, we recognise that we must advance arguments to sustain existing capacity. A number of my hon. Friends have done that. My hon. Friends, the Members for Rotherham (Mr. Crowther) and for Heeley, for example, have argued cogently for maintaining existing capacity in the industry. I shall not rehearse their arguments.
The right hon. Gentleman appeared to have left his interventionist hat on the peg of his earlier ICL statement when he began to talk about non-intervention, the disadvantages of public enterprise and other similar phrases. He cannot have it both ways. I understand his trouble with Conservative Back Benchers. In some ways the Opposition have done him a favour by not dividing the House. If there had been a Division, he may have found himself on the wrong side if some of his hon. Friends had had the opportunity to vote. Of course, it is right that he should be intervening. There is no reason for him to apologise for so doing.
The right hon. Gentleman mentioned the public interest, as I have done. What is the public interest in these matters? The right hon. Gentleman asserts that it is not to have public enterprise. We contest that. He asserts—I think I understand him correctly—that the present size of the corporation is unlikely to be maintained. He knows, and his hon. Friend the Member for Faversham (Mr. Moate) reminded him, that imports of steel into this country are significant. The corporation and the private sector are not meeting the demand for steel in the British economy, even at present. The concomitant of further reduction in capacity for the BSC is more imports into the British economy, and that is not in the national interest.
We are debating a strategic industry. The Secretary of State said today that it was important in the national interest to sustain ICL; and, similar, if not identical, arguments can be used about the British Steel Corporation. We need a construction industry—that requires steel. We need an engineering industry—that requires steel. We need defence—that requires steel. We need a shipbuilding capability and a capability to produce goods for the exploitation of the British sector of the North Sea—that requires steel. We have a coal industry that requires steel. We have an electricity industry that requires steel, and a nuclear power industry which requires steel. Our railways, too, require steel.
Let us not pretend that liquidation of the steel industry—that, in effect, was what was being suggested by a number of Conservative Members—would be in the interests of the taxpayer. Liquidation would be an expensive exercise. As my hon. Friend the Member for Heeley reminded us, we are discussing significant national assets, an organisation with a turnover in excess of £3 billion. It would be no soft option for the taxpayer or anyone else to liquidate the BSC.
In 1969–70, the corporation had a 70 per cent. share of the market. The hon. Member for Bromsgrove and Redditch (Mr. Miller) expressed concern about the corporation's share of the market. It is less now than it was

a decade ago. It fell to below 50 per cent. last year. Now it is coming up again, as Mr. MacGregor said in evidence to the Select Committee last week. In fact, one of the reasons why the Secretary of State appointed Mr. MacGregor was to make the corporation aggressive again so that it would have a larger share of the market than it has now.

Mr. Hal Miller: Does the hon. Gentleman accept that there are real fears that this aggressive competition by the BSC, supported by public funds, is extending downstream from steel making into secondary activities? That is one of the main causes of concern.

Dr. Cunningham: The corporation has been involved in what the hon. Gentleman describes as downstream or secondary activities for a long time. Some Conservative Members, including the right hon. Member for Taunton (Mr. du Cann), argued to much the same effect in the last debate that we had on steel. Labour Members do not accept that the corporation should be pushed back into being simply a bulk steel producer. There is no good commercial, economic or political argument for that. We recognise the problems of the private sector, and those problems are caused, in the main, by imports from countries such as the Federal Republic of Germany.
Ministers have been fair to their Back Benchers in the stand that they have taken. They have said that they are willing to investigate any evidence which suggests that the British Steel Corporation, as a policy, is unfairly trying to undermine the private sector. Hon. Members cannot ask for anything fairer than that. It will be interesting to see whether any of the claims can be proved.
The problem is that the Government's wider policies and lack of industrial strategy will make it difficult for the proposals to come to fruition and for the corporate plan to meet success. The construction, chemical and engineering industries are facing grave difficulties. We have just heard of GKN's position. The chemical industry, traditionally, is one of our most successful industries. Figures produced by the Chemical Industries Association predict a 16 per cent. fall in real terms in investment this financial year. That is very damaging, not only for our industrial prospects but for the construction industry and, hence, for the steel industry.
We have been told that shipbuilding has had its worst year for many decades. The railways face unrealistic cash limits. Even the CBI is calling for public capital investment. All those factors are damaging to the prospects of the corporation and the private sector.
It must be a long time since a leading article in The Times—which cannot be described as the village voice of the Labour Party—drew attention to the need for industrial strategy, as it did on Friday 20 February. It described the present position as a "lacuna at the centre" of Government policy. It went on to say something even less kind about the Secretary of State of which I shall not bother to remind him. My purpose in referring to the article is to show that there is a widespread recognition that the ad hoc approach, the one-off interventionist approach of the Secretary of State, who intervenes here and intervenes there with no overall strategy, is not in our national interest.
I cannot understand why he has not reached the conclusion that it is not only in the national interest to have a national strategy but in his interest. We certainly urge


a strategy on him. That is the best chance of success for the major financial proposals—for the public sector, the taxpayer and the British industry as a whole.
I turn to the manifest crisis in the Community. I understand that discussions on the restriction proposals, State aid, the social fund and existing quotas are ongoing but that little progress is being made. Perhaps the Minister of State will explain. I understand that he is to resume discussions on 26 March.
Are the British Government one of the Governments responsible for the failure to reach agreement on the social fund provisions because of their attitude to the legality of that which is proposed? The Minister of State shakes his head. That was so until recently. I am pleased that is no longer the case.

Mr. Tebbit: That was never the case We think that the method proposed is the wrong method. We have considerable doubts about it. We have not blocked an agreement. We are searching for an agreement. When other countries come forward with firm proposals we shall not let anything stand in the way.

Dr. Cunningham: I listened carefully to what the Minister said. He said that the Government had not blocked an agreement. If he means that in so many words, I accept what he says. I hope that he was not denying that the British Government was one of the Governments which was questioning the legality of the proposed transfer of funds between budgets. That is a matter of record. It was one of the the things which prevented an agreement. I do not wish to become involved in wrangling about that matter.
Will the Minister tell us a little more about the monitoring of EEC quotas? Have any problems developed? What does he think will happen to the existing mandatory quota system when its six months period expires? That is important for the future prospects of both the public and the private British steel industry.
The Secretary of State was right to ignore some of the more doctrinaire calls from Conservative Members to liquidate the corporation. I hope that, far from doing that, he and the Minister of State will re-emphasise their support for Mr. MacGregor in his efforts to sustain the corporation, although we do not agree with all of them in detail. The Government are responsible for that. They went to a great deal of trouble to get Mr. MacGregor and at no little expense. Therefore, they can hardly justify not supporting him to the hilt, having appointed him.
The major capital reconstruction will not be one of the contentious issues which we discuss in Committee. It must be supported. We must try to ensure that the new start for the industry succeeds. That relates to the point made by the hon. Member for Hertfordshire, South-West (Mr. Page)—I nearly said "Workington". We used to be constituency neighbours for a little while. I did not regret the termination of that arrangement. Nevertheless, for a time the hon. Member was involved with the BSC plant there. He and others have emphasised that the trade unions should now support the MacGregor proposals. I should like the trade unions to be able to support a future for the industry. All Opposition Members would like that.
In that connection, I refer now, as I have done before, and as have a number of my right hon. and hon. Friends, to provisions in the 1975 Act, which place a statutory

requirement upon the corporation. The Act states that before reaching conclusions in consequence of a review undertaken in pursuance of subsection (1)
the Corporation shall seek consultation with organisations appearing to them to represent substantial proportions of the persons employed by the Corporation or the publicly-owned companies or of any class of such persons.
That is an Act of Parliament. It places upon Mr. MacGregor, the House and the Secretary of State a duty to ensure that the unions are taken into all confidences and are party to discussions about major changes in the industry. If Mr. MacGregor steadfastly refuses to do that he can hardly complain if they refuse to accept what he is saying. The same is true of the position of the Secretary of State. If the Secretary of State steadfastly refuses to see that that provision of the 1975 Act is implemented—it is not repealed by the Bill, so it will persist—how can the unions be critised? The reality is that they want to see success for their industry. They would rather be part of an industry that is making a profit and—to coin a phrase used by several Conservative Members—is off the backs of the taxpayers. They would welcome that. They should be given the chance to discuss the detailed proposals for the industry, not only because the Opposition say so, but because the law says so. That is the law, and I call upon the Secretary of State to ensure that it is carried out. That section is germane to the question raised by several hon. Members about the discussions taking place on Phoenix I—about which we know a little—and on Phoenix II. Section 5(1) states:
It shall be the duty of the Corporation, so often as occasion seems to them to require it or as the Secretary of State may require it, to undertake a review of their affairs for the purpose of determining whether the carrying on of the activities that have fallen to be carried on under their ultimate control is organised, so far as regards the direction thereof, in the most efficient manner, and to report their conclusions to the Secretary of State.
I see that the Minister is indicating that I am running over my time. I apologise, but it is an important point. Mr. MacGregor should report the details of the discussions about the reorganisation of the steel industry. My hon. Friends the Members for Rotherham and Kettering (Mr. Homewood) and others referred to section 5(7). It states:
The Secretary of State shall lay before each House of Parliament a copy of every report made under subsection (1) …above".
My right hon. Friend the Member for Llanelli (Mr. Davies) raised that point in connection with Duport. To quote one of his famous forebears,
Why look in the crystal ball when you can read the book?
The Act says that these matters should be reported to the Secretary of State and to Parliament. We want the Act to be implemented in respect of Phoenix I and II—not because we are not necessarily opposed to them, we are not, but because we are entitled to know—as is the taxpayer—exactly what is happening.
I shall be brief. I apologise to the Minister for exceeding my time limit. There are two views about what is happening in industry. One is that the Government will, once and for all, make us face reality, that industry will be dealt with, that a climate for enterprise is being created, that competiveness and productivity will improve, and thereby the Government will lay the basis for our future prosperity. That sums up the Government's view. The Opposition do not share that view. That view is not shared by the CBI, nor by many economic commentators. That view is not borne out by events since the Government took office. The excessive reliance on monetarism, on the size


of the public sector borrowing requirement, the control of the money supply, the protection of an over-valued sterling and high interest rates are causing a holocaust for British manufacturing industry, in which the British Steel Corporation is being caught up.

The Minister of State, Department of Industry (Mr. Norman Tebbit): I shall do my best in the time that is left—I am not criticising the hon. Member for Whitehaven (Dr. Cunningham)—to answer as many points as I can. That will present some technical difficulties at this stage in our proceedings.
The hon. Member for Whitehaven criticised my right hon. Friend for, in effect, giving a warning with the money. It would have been more correct to criticise my right hon. Friend had he not given a warning at the time that the money was made available. It would have been extremely damaging for the morale of all those involved if the money had been given without some pretty straight talking. There must be some pretty straight talking when one is writing off £3,500 million of taxpayers' money.
As the hon. Gentleman and the House know, many trade unions are dedicated to having the extension of public ownership as a political objective written into the rule books. I recollect the words of the right hon. Member for Manchester, Ardwick (Mr. Kaufman) during passage of the Aircraft and Shipbuilding Industries Bill. He excused what he was doing on the ground that it was for the advance of Socialism. In the face of dogmatism of that kind the hon. Gentleman must not be surprised if, from time to time, Conservative Members take a slightly different view.
The right hon. Member for Salford, West (Mr. Orme) said that the clauses to which he took exception were based on a doctrinaire dislike of nationalised industries. Those feelings are not doctrinaire. They are entirely empirical.
Cash-hungry, profitless, wealth-consuming industries are objectionable, whether they are in public or private ownership. In private hands the agony is normally short-lived and the cost to the taxpayer is minimal. In public hands a loss-making industry has an agony that is protracted and intense, and the taxpayer pays. Whether the humane killer or the life support system is used, it is a very expensive operation. The task that my right hon. Friends and I have is to decide whether it shall be the humane killer or the life support system. We hope, by whatever means we choose, to restore the industry to viability.
The right hon. Gentleman is not alone. People in the private sector who think of themselves as entrepreneurs have the same problem. The right hon. Gentleman has not yet learnt to tell the difference between an asset and a liability. An item is not an asset because one has paid a lot of money for it. It is an asset only if it is earning its keep, and if, potentially, it can be sold to somebody else. If it cannot, it is a liability. The sooner that is understood, both in the public and the private sector, the better. I have had to tell people in the private sector "Gentlemen, what you tell me are your assets are, in fact, your liabilities. You cannot tell the difference."
I was glad of one thing in the right hon. Gentleman's speech. He said that he was no defender of Morrisonian nationalisation. God be praised. That is another U-turn, and we must be grateful for them when we see them. I say

that it is a U-turn because it was only about four years ago that the right hon. Gentleman voted to trap the aerospace and shipbuilding industries precisely into the Morrisonian glue-pot of nationalisation in exactly the same form as had been used in 1945. He did that in 1977–32 years later.
I am glad that the right hon. Gentleman has had a revelation in the past couple of years. I welcome his support in getting rid of Morrisonian nationalisation wherever it is found. I hope that he will promise never to go in for it again if he finds himself in the position of being able to do so.

Mr. Orme: I am enjoying the hon. Gentleman's rhetoric, but what I said was that the Morrisonian mould that has been used for the public sector should be broken. There should be other forms of public ownership and control. That is my point. That can be brought about with industrial democracy and other measures.

Mr. Tebbit: Yes, it is always going to be a great new idea tomorrow, is it not? What a pity it is that the right hon. Gentleman did not use the great knowledge that he now has to reform some of the nationalised industries when he was in office. He was not interested in doing it then. He has only just invented it. What is the matter? Is he afraid of the Social Democrats? Is that why he has invented this? He does not have to be afraid of them. We shall help him. He should stand up to them and be a man. As the right hon. Gentleman knows, they too are being infiltrated from the Left these days.
One of the most important things on which I should spend a few moments, because it is at the heart of many of our problems, is the question of the actions that we should take in Europe in order to help solve the problems of the steel industry. There are three things that must be done. The first is to come to the point at which, in the short run, we can get the price of steel in the market back to one at which efficient steel makers can be profitable—not the inefficient steel makers, not those that have to have subsidies, but the efficient ones. That is the first and most immediate task, because unless we achieve that we shall have calls for protection and subsidy from the steel makers that are at present unprotected and are relatively—I emphasise "relatively"—unsubsidised, and that way lies disaster.
Secondly, we have to move towards a longer-term solution. I am convinced that that longer-term solution lies in our phasing out public subsidies of steel making across Europe. If we achieve that, the question of capacity will adjust itself automatically in the longer term. That is the second task, and that will be another very difficul one.

Mr. Hooley: rose—

Mr. Tebbit: I would rather not give way. Many questions have been asked, and I want to answer as many as I can. I have already lost a few minutes.
The other part of this argument is that we must work for a package of what, in the Community, are now usually called social measures in order to lessen the impact on those people who will lose their jobs during restructuring. I assure the House, first, that most of the other Ministers in Europe take views similar to those that I have expressed.

Mr. Campbell-Savours: They cannot make it work.

Mr. Tebbit: The hon. Gentleman keeps prattling "They cannot make it work." We certainly cannot make the present system work, and we had better find a better


one pretty quickly. If the hon. Gentleman is to start on the basis that there is no salvation through the present method he will have to come to the conclusion that there is no salvation through any method.
As I said, the other element is that we must have a package of social measures. I believe that that is generally accepted among the Ministers. It will be particularly difficult to sell this package in countries that are still expanding production and dumping steel at great public expense. It will present a very difficult political problem for them to deal with that policy. I assure the House that I have pointed out to other Ministers that the British steel industry has declined dramatically in size. I think that much of that is due to our own shortcomings. I have given them good reason to understand that when the public sector of the steel industry has just lost 50,000 jobs and it is proposed that another 20,000 jobs will be lost this year, it would be objectionable if they were to ask British industry to bear a further heavy burden of closures. In particular, it would be objectionable if they were to ask us to do that when others who have been producing subsidised capacity on the European market did not do their share of carrying the can for their misdeeds of subsidising and producing excess capacity. I shall go to Europe in order to achieve that end. I do not know how much I shall achieve next week. Events will be coloured by what happens during this week's talks between the steel producers of Europe. Indeed, I think that those talks will commence tomorrow.

Mr. Robin Maxwell-Hyslop: rose—

Mr. Tebbit: I am sure that my hon. Friend will forgive me if I do not give way, because I have little time left in which to deal with the points that have been raised. Hon. Members raised the important subject of progress with the phoenix companies and the Companies Act companies within the BSC.
That problem was raised by the right hon. Member for Salford, West, by my hon. Friend the Member for Surrey, North-West (Mr. Grylls), by my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller), by my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), by my hon. Friend the Member for Dudley, West (Mr. Blackburn) and by the right hon. Member for Llanelli (Mr. Davies). In response to the right hon. Member for Salford, West, I should point out that those employees of the BSC who will become employees of Allied Steel and Wire will have to discuss the question whether they will continue to enjoy inflation-proofed pensions—[Interruption.] The hon. Member for Liverpool, Walton (Mr. Heffer) does not have to be silly when we are talking about serious matters.

Mr. Eric S. Heifer: I remember when the hon. Gentleman was in Opposition.

Mr. Tebbit: I remember that the hon. Gentleman is now in Opposition and I am now in Government. I advise him to remember that and not to interrupt in a debate that he has not attended.
Pensions are to be negotiated between the employees and management of Allied Steel and Wire Limited. It is not for me to say what the arrangements should be. They will be made between the parties directly concerned.
We are making progress in forming the Phoenix II consortium. Beyond that, there is the possibility of

Phoenix III. My hon. Friend the Member for Surrey, North-West asked me to make the BSC move quickly. He asked me to take powers to force it into the phoenix arrangements. Uncharacteristically, he has not thought the problem through. If I took such powers, the Government would inevitably set up the consortium, would pick the partners and the plants. I and my advisers in the Department are not the best equipped for that job. We shall not have to carry the can as the management will. If I am to adopt powers to direct the BSC about plants, terms and prices, perhaps I should have the powers to direct the private sector too. It would do me no good to have only half the powers required. Therefore, it is better not to take that point further.

Mr. Denzil Davies: Which companies are being considered for inclusion in the consortium for Phoenix II? Who will decide which companies are to be included?

Mr. Tebbit: The participants must make the decision. When the BSC acquired the assets from Duport, it had in mind that they would be used in Phoenix II. There have been discussions between GKN and Tube Investments Ltd., and possibly other companies, too. I think that it would be best if I did not, in advance, perhaps, of the shareholders of the companies being told, go through a list of the companies that are negotiating. They are not my companies.

Mr. Denzil Davies: Who decides?

Mr. Tebbit: Clearly, it is decided by agreement with the parties concerned. I do rot decree who goes in or who stays out. It is a commercial judgment.

Mr. Denzil Davies: The parties concerned presumably include the British Steel Corporation. It decides in the end which assets it wants and which it does not.

Mr. Tebbit: It is not a question of which assets British Steel wants and which it does not want. Curiously enough, it takes two to make a bargain. That answers also, I think, the question raised by the hon. Member for Sheffield, Heeley (Mr. Hooley). He asked why the British Steel Corporation is in a 50-50 owned company and does not have control; it has got 50 per cent. of the shares. I do not know whether it has occurred to the hon. Gentleman that somebody else has got 50 per cent. of the shares and has not got control either. It is a straightforward mathematical matter and I do not see why it is causing him such a problem.

Mr. Grylls: The point surely is that in the overlap areas it is the British Steel Corporation's businesses that are in danger of competing by using Government subsidies. The hope was that my hon. Friend could put some pressure behind them, because they are the ones that could potentially do the damage, and in some cases already have done the damage, to the private sector companies.

Mr. Tebbit: My hon. Friend is right, of course, but both British Steel and the private sector are bleeding at the moment. Both sides acknowledge that there are areas in which there is excessive capacity, both sides have an interest in seeing a more efficient set-up, and both sides want to come to agreements. That is why we got an agreement on Phoenix I and that is why we shall reach agreements on Phoenix II and III. We just have to say that it must be left primarily to the parties concerned. I will do my part in encouraging the corporation to enter this type


of company, and I shall also do my part, as my hon. Friends the Members for Bromsgrove and Redditch and Faversham (Mr. Moate) particularly wanted, on the question of the Companies Act companies within the corporation.
My right hon. Friend the Secretary of State said on 24 February that Mr. MacGregor would be putting some businesses in Companies Act companies, and I can confirm that the corporation has already put in hand arrangements to place the Stanton and Staveley business and the BSC stockholders' operation-British Steel Service Centres—into separate Companies Act companies and that that reorganisation will take place shortly. So I think that there is real progress in these areas.
In the last few minutes available to me I should deal also with some of the other points that were made. I should like particularly to comment on the speech of my hon. Friend the Member for Hertfordshire, South-West (Mr. Page), because he mentioned something that I think almost nobody else did, namely, the role of BSC (Industry) Ltd. in helping former steel workers into new jobs. This is an important and worthwhile task and I hope that it will continue to go well—indeed, better than it has in the past.
It may be particularly appropriate this evening to refer to the news, in the papers this morning, of the remarkable success of five former steel workers in Wrexham in obtaining the franchise for a commercial broadcasting station. I am sure that the whole House, whatever hon. Members' views on commercial broadcasting, will want to wish them well and say how glad we are that that sort of thing is happening. I had considered saying something about the speech of the hon. Member for Motherwell and Wishaw (Dr. Bray), but on reflection I think that I should not do so. It was dealt with extremely well by the hon. Member for Wrexham (Mr. Ellis), and if I added anything to that it might tend to spoil it. What the hon. Member for Motherwell and Wishaw said about my right hon. Friend was unworthy, ill-considered, intemperate, dogmatic, ill-informed and thoroughly discourteous. The discourtesy was further marked by the fact that, having delivered his attack upon my right hon. Friend for not being present to listen to him, the hon. Member walked out of the Chamber and has not been seen since.
Anyone who is interested and who wishes to follow up the point that the hon. Gentleman made when he tried to amaze the House with erudite remarks about inflation cost accounting should turn to the BSC accounts for 1979–80, from which it will be seen, on page 45, that the hon. Member for Motherwell made a fool of himself.
My hon. Friend the Member for Bromsgrove and Redditch said that it was unfair that we should support only the public sector. He thought that we should help people with losses in the private sector. When times were good and Hadfields was making profits we did not expropriate Lonrho's profits. When times are good in the steel industry we hope that it will make profits, which will accrue through the BSC to the taxpayer until we denationalise it. Equally, when it makes losses, we as taxpayers have to carry the can.
Competition between public sector and private sector can never be entirely fair. I have heard both public and private sector chairmen shout "Foul" about it. There is a great deal to be said on both sides. That is the purpose of forming the phoenix companies. They are private sector unsubsidised companies that will stand on their own, but with a share from both public and private sector.
The hon. Member for Redcar (Mr. Tinn) must know we are all aware of the physically hard life of steelworkers. However, for too long the industry has produced far too little steel per man, not just in bad times but in good times. Of course, it is up to international standards, but oh, how late it is, and how much better it would have been if it had happened five or 10 years ago.
I understand the feelings expressed by my hon. Friend the Member for Cornwall, North (Mr. Neale) when he spoke for the taxpayers. We have to accept that this year's cash requirements for the BSC are roughly equal to the 20p tax on petrol. There is consistency on the part of those who agree with both or disagree with both, but we cannot regard as credible politicians those who call for one without the other. The hon. Member for Wrexham said that in the past the industry had suffered far too much from politicians. We have all intervened, with- the best of motives, some eagerly, some reluctantly, but few of us successfully.
I want to end the debate on a positive note, as the hon. Member for Redcar asked. Let us try to cease recrimination and look forward to the future. There are things to be done by all of us. The workers in the industry must make steel, shape steel and sell it more efficiently at lower cost than ever before. When I say "workers", I do not distinguish between Mr. MacGregor and the other workers in the BSC. They are all workers wherever they are. Mr. MacGregor is not a one-man band; the reverse is true. One of his principal tasks is to develop the new management talents that have been needed for a long time. I have the greatest confidence in him, and I believe that he has the support of all those who are prepared to put their backs into making the industry a success. If they produce steel right across the board at German prices they have a good chance of success in Europe, after the politicians have done their bit in the discussions next week.
I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

Orders of the Day — IRON AND STEEL [MONEY]

Queen's Recommendation having been signified—

Resolved,
That, for the purposes of any Act of this Session to modify the functions of the British Steel Corporation and to make further provision with respect to the finances of the Corporation and the publicly-owned companies, it is expedient to authorise the extinguishment of the Corporation's liability in respect of long-term loans made to the Corporation by the Secretary of State.— [Lord James Douglas-Hamilton.]

Orders of the Day — Merseyside Development Corporation

10 pm

The Minister for Local Government and Environmental Services (Mr. Tom King): I beg to move,
That the Merseyside Development Corporation (Area and Constitution) Order 1980, a copy of which was laid before this House on 27 November, be approved.
Following the passing of the Local Government, Planning and Land Act 1980, approval was given by Parliament in principle to the concept of UDCs. Tonight marks the laying of the first order for one of the UDCs. We made clear in Committee and on Report our intention that there should be only two—one for Merseyside and one for London Docklands. This first order marks the first stage in the establishment of the Merseyside UDC.
The proposal that I put before the House involves the setting up of the corporation to achieve the regeneration of some 865 acres of the redundant dock areas of Merseyside. It involves the district council areas of Liverpool, Sefton and the Wirral. Hon. Members will have had the opportunity to study the maps which set out clearly the areas envisaged.
The Government made clear in the discussions on the Local Government, Planning and Land Act their belief that the approach of an urban development corporation, involving a single-minded agency tackling problems of exceptional dereliction with sufficient resources and powers, was an appropriate way to find a solution to very long-standing problems.
It may help the House if I recall the progress that has taken place since the passing of the Act. It was necessary for the orders to be laid, and the judgment was reached in another place that both orders, for Merseyside and for London Docklands, were hybrid. This involved the opportunity for petitions to be laid against both orders. One petition was laid against the Merseyside order, but this was subsequently withdrawn. It is therefore now possible, without interruption, to proceed to the discussion and, we hope, the approval of the order by the House.
I shall deal briefly with the corporation, its powers and the area involved. I must say at once that this is a novel procedure. I understand that there may well be queries and uncertainties that hon. Members wish to raise. With the leave of the House, Mr. Deputy Speaker, I shall seek to reply to the debate and clear up any misunderstandings before hon. Members are asked to reach a decision on the matter.
As hon. Members will be aware, the board already exists in "shadow" form in terms of its senior members. Its shadow chairman is Mr. Leslie Young; its deputy chairman is Sir Kenneth Thompson; and its chief executive is Mr. Basil Bean. I think that hon. Members are familiar with the precedent which exists for setting up a shadow corporation in this form. In an enterprise of this kind, it is clearly important that there should be the minimum hiatus. With the shadow corporation, it has therefore been possible for a considerable amount of preparatory work to be undertaken in advance of the establishment of the corporation proper.
If the order is approved tonight the Secretary of State proposes to confirm the appointments of Mr. Leslie

Young, Sir Kenneth Thompson and Mr. Bean to the board. Other appointments will be made shortly and will include those, in the words of the Act,
having special knowledge of the locality".
As hon. Members will see from the order, the Secretary of State can appoint 11 members plus the chairman and deputy chairman. It is our intention that the corporation should operate with a small staff. It will work very much in conjunction with local expertise. In other words, it will not seek to be a master of all trades but will "buy in" local skills, use local firms and work with and use the services of the local authorities in the areas in which it will operate.
Part XVI of the Act provides for a wide range of specific and general powers to be exercised by the corporation in carrying out its tasks. In that connection, hon. Members will have noticed that the subsequent provisions relate to the arrangements which may be made for excluding any of those powers if that is thought appropriate. The order makes no proposals for any exclusions. In other words, the Merseyside Development Corporation will have full powers as set out in the Act.
However, I enter one caveat. We have no current intentions to bring forward subsequent orders to enable the corporation to exercise either building control functions or the powers of a housing authority. None the less, the corporation will still be able to provide housing under its general powers, although it will not assume the full responsibilities of a housing authority.

Mr. James A. Dunn: The right hon. Gentleman said that the order does not exclude building powers. Does it contain planning authority proposals?

Mr. King: The hon. Gentleman is extremely alert, because that is the next paragraph in my speech.
It is the Government's intention that the corporation should have the full range of planning authority powers which the Act permits. My right hon. Friend accordingly intends to lay a further order, which will be subject to negative resolution, to cover planning aspects, as well as orders which will cover the vesting of certain publicly owned land.

Mr. Allan Roberts: The part of the Merseyside Development Corporation in my constituency, as proposed on the present boundaries, includes the only existing housing anywhere in the boundaries. The Minister said that the urban development corporation will not assume the full role of a housing authority but will have certain housing powers. How will the UDC's jurisdiction be exercised over existing houses within the boundaries that are to be designated?

Mr. King: The existing housing authority in the hon. Gentleman's constituency is Sefton. I am aware of the housing estate to which he refers. The situation will remain exactly as it is. It will remain the responsibility of the Sefton council. I understand the hon. Gentleman's concern, because it was a concern well before the concept of an urban development corporation. If the hon. Gentleman succeeds in catching the eye of the Chair, I shall be able to respond to him at greater length on this point. I am aware of his concern, and I hope that what I have said will be taken as an interim reply.
I turn to the financial arrangements. As last week's estimates showed, we have made a level of grant provision for the corporation of £16.5 million in the coming year.


That sum is additional to the £17 million that has been allocated to the Liverpool partnership for the coming year, and the Wirral can expect to receive about £2 million as an inner city programme authority.

Mr. Anthony Steen: Is my right hon. Friend saying that of the £88 million allocated to development corporations in Liverpool and London, London will get £72 million and Liverpool only £16 million?

Mr. King: The figure is £82 million, and the division is then correct. My hon. Friend has also been quick on his feet. The next sentence states that it is possible that further sums will be allocated to the new development corporation in 1981–82. We may have more to say about that in the course of the year.
In the first year of operation, inevitably, much of the expenditure will be for land acquisition and initial reclamation work, but provision is made in the strategy—which we expect to be published by the UDC shortly—for expenditure on environmental schemes, infrastructure and industrial support.
I deal now with the reasons for choosing the areas for the UDC. Inevitably, difficulties occur in selecting an area—which must be limited—for the provision of the UDC. The first was to identify the areas that we believed suffered from the worst dereliction and were, therefore, most in need of the regenerative capability that a UDC can contribute. Secondly, in seeking the areas of worst dereliction we were anxious not to prejudice the existing operating capability of the port of Liverpool. The third criterion was to see in what ways, by establishing areas that might be most suitable for port-related activities, we might be able to support and encourage the parts of the port that are successful. The fourth criterion was not to cut across local authorities' existing efforts where they have been anxious to support and stimulate industrial and economic revival.
As a result, as hon. Members will see from the order and the simple map attached, three parcels of land are involved. Most of the land is in public ownership. Almost three-quarters of it is owned by the Mersey Docks and Harbour Board. Much of the balance is owned by British Rail.

Mr. James A. Dunn: The right hon. Gentleman has made a statement of great significance. There is no Mersey Docks and Harbour Board. It is the Mersey Docks and Harbour Company, which is a private company. The land is therefore in private ownership.

Mr. King: It is difficult, because we are discussing the MDHC and the MDC, which will replace it. The hon. Gentleman is correct. I should have said the Mersey Docks and Harbour Company. I shall come to the point about the land. The hon. Gentleman will be aware of the public support involved in the company.
Much of the land proposed for designation as an urban development area on Merseyside is in pretty bad shape. The majority is derelict docks. At the same time, some of it has an economic life, a sort of second life of its own. A number of warehouses have been taken over by small firms which have found them useful and valuable. Those firms are undoubtedly taking advantage of the low rents

that exist but in many cases they operate in pretty poor conditions. A number have no real security of tenure under the present situation.
The South Docks ceased effective operation in the early 1970s. They are full of polluted silt. There are problems to be faced. At the same time, many of the sheds house small companies. There is a big job to be done to attract private investment. We believe that with encouragement there could be a valuable and profitable base for the economic development of the area. The Riverside area, which has been partly cleared, involved petrol storage. We believe that it is capable, with suitable landscaping, of being used for housing provision. The Bootle docks and its back-up land is also an area where the support and port-related activities could be helpful.
Across the river there are further derelict docks in Birkenhead and in Wallasey. I note the presense of my hon. Friend the Under-Secretary of State for Health and Social Security, the hon. Member for Wallasey (Mrs. Chalker), and appreciate her interest in this matter. Here again, a problem exists of derelict dock areas, which are being used by some small firms. There exists the opportunity, which the stimulus of an urban development corporation can provide, for far more effective utilisation.
These areas together make up a challenge to which we believe the Merseyside Development Corporation is an effective response. This response, we believe, can be achieved by the development corporation only if it is done with the full co-operation of the existing tenants, the local authorities and the Mersey Docks and Harbour Company. A shadow team is already at work. It has had close consultation with bodies already existing in the area. This must clearly continue. If the urban development corporation is to succeed and if this initiative, backed by a significant sum of public money, is to be successful, there must be the closest co-operation and consultation with the bodies in the area, not merely with the statutory undertakers and the local authorities but with other existing landlords.
This is a major challenge to an area that has faced dereliction and decline for far too long. It is a major public initiative that I am inviting the House to approve. I would be the first to recognise that public initiative on its own will not succeed. The test for the development corporation, if the House chooses to approve it tonight, will be whether it can provide the climate, the opportunity and the pump-priming initiative that will encourage outside private investment to play its part.
I believe that the corporation has the framework and has the beginnings of the team that can achieve this task. If it does, it will make a major contribution to the regeneration of one of the most significant but, sadly, most significantly declining parts of the United Kingdom. I commend the order to the House.

Mr. Gordon Oakes: The House is grateful to the Minister for the full way in which he introduced the order, which is of great importance to the whole of Merseyside and the North-West of England. I can assure him that the Opposition have no intention of voting against the order. We would never vote against anything that brought desperately needed money to the Merseyside area. There are, however, aspects of the order and the whole


concept of the urban development corporation and its creation about which many Opposition Members are exceedingly sceptical.
Like the hon. Member for Liverpool, Wavertree (Mr. Steen), I am disappointed with the moneys that will be made available. Almost exactly one-fifth of the £82 million—it is not £88 million—will go to Merseyside, while four-fifths will go to London. We are dealing with over 800 acres. In the first year almost all of the £16 million will be devoted to acquisition costs. Not much will be spent except on acquisition costs. This is urban land that is owned, as my hon. Friend the Member for Liverpool, Kirkdale (Mr. Dunn) correctly said, by the Mersey Docks and Harbour Company.
The Government are appointing a chairman, a deputy chairman and 11 other members, including the chief executive, to do a job which effectively could have been done well by the democratically elected local authorities. The local authorities lacked only the money. The money is being provided to the body that will be appointed by the Secretary of State. I was delighted when the Minister said that he hoped that the body created would work in close co-operation with the local authorities. Disaster will result to Merseyside and Liverpool if the two entities become in high conflict with each other. They must work together for the ultimate benefit of Merseyside.
When we were discussing this matter in Committee the Minister often said that the urban development corporation would enshrine that same sort of structure as a new town but within an urban context. I accept that view. However, I cannot envisage any new town corporation operating in the geographical manner in which the order has been designed. There are four separate pieces of land, two of them together in Birkenhead, one in Bootle and one in Liverpool, which are divided by an estuarial river. This is a different concept from a new town where one deals with virgin territory and assemblies of land all in one unit. There are not only three separate local authorities and a council to deal with, but these are dockland areas only. I admit that there are some marshalling yards at Sefton, but basically the corporation will be taking over docklands.
Is it not a misnomer to describe this undertaking as the urban development corporation for Merseyside? It is really a dockland development corporation. This could create problems for the rest of the area and for the local authorities in what they are trying to do.
Those of my hon. Friends who represent Liverpool constituencies, including my hon. Friend the Member for Bootle (Mr. Roberts), could each argue constructively that the whole of his constituency is in difficulty. There are vast areas of derelict land. There are vast areas that need to be developed within Bootle and within different parts of Liverpool. The scheme involves 800 acres of dockland only. The urban development corporation will have to think carefully when it co-ordinates its activities with what the local authoritites have done and are doing in developing the whole of Merseyside area. I foresee difficulties unless great care is exercised by the corporation.
The chairman, the chief executive and the deputy chairman have been named, but we are disappointed that we do not know who the other members will be. No doubt the Secretary of State knows who the other 10 people will be. It should be possible for him to name tonight those who are to be members of the development corporation. It is a matter of great concern in Merseyside. We hope that they

will be people from Merseyside, or at least from the North-West of England. We do not want appointees from London or some other area. We want people who have an indigenous interest in the area. I am only sorry that the Minister has not been able to give us the names in this debate.
I mentioned the difficulties that the corporation will have in connection with the existing local authorities—the four separate parts divided by an estuary. I remind the Minister that within 20 miles of the area there are no fewer than four new town corporations, some of which are being wound down. They are Skelmersdale, Central Lancashire new town, Runcorn and Warrington. All are within 20 miles and are competing for resources and industry, as are the special development areas. So it will be difficult for the development corporation to attract investment to the area.
That leads me to the next matter—the type of development that the Secretary of State envisages. He mentioned some housing functions. I am not sure whether he was talking about houses that the development corporation would take over because they are in a designated area, or new building and new housing within the designated area.

Mr. King: Both.

Mr. Oakes: The Minister says that he meant both. He is not asking for housing authority powers, and no order is coming before the House in that respect, so presumably the existing district housing authority will be the housing authority. I am glad to see that the Minister agrees.
The Minister mentioned commercial developments in the area and dock-related development. What sort of development does he have in mind? Is it private sector or public sector development? There was a scheme for Government offices, and it was a highly attractive proposition, because it would have brought Government offices to Merseyside. Will the Government assist their own development corporation—their own appointees—by building Government offices, and thus provide much-needed office jobs in our area? That would be a great attraction.
My fear is—I hope that I am wrong—that nothing will happen. We have seen many schemes for Merseyside, including paper schemes to develop the docklands, which have all come to naught. Some were produced by the local authority, and others by the county council. Now we have this new authority, in which we are putting much hope, as I am sure the hon. Member for Wallasey (Mrs. Chalker) will understand. Nevertheless, we are somewhat sceptical, unless there is more positive Government assistance than £16 million, about whether it will actually bring work and jobs to Merseyside.

Mr. Steen: The right hon. Gentleman is quite right when he says that the local authority has encouraged many schemes over the years, but he must accept that his side, too, introduced many schemes. I shall not bore the House by giving the full list, but it includes comprehensive community programmes and partnerships, which came to naught. This is a real attempt to shift the balance away from socially motivated projects to economically motivated projects in an attempt to bring back real wealth to Liverpool, and not just community enterprises.

Mr. Oakes: The hon. Gentleman is saying that Conservative and Labour Governments have failed


Liverpool and I agree with him. The order is regarded as a desperate last fling. If it fails there will be utter despondency in the Merseyside area. If nothing results there will be bleak despair in the area.
The Minister hopes that a small staff will be involved and that the corporation will buy in from local industry and local authorities. How many staff does he envisage will work for the corporation? How much work will be put out to Liverpool Merseyside, Sefton and other authorities?
My hon. Friend the Member for Kirkdale made an acute intervention about the Mersey Docks and Harbours Company. The Government have run into some difficulties with the London order because of its hybridity. Some discussions have been necessary in another place. Hybridity is involved in the order that we are discussing. Let us suppose that a compulsory purchase order is made, not under this order but under the planning order, by the development corporation. That could be subject to the doctrine of hybridity and have to go to the House of Lords. I do not state that that is so but I ask whether it is so. If it is, I can envisage endless delays and problems. The derelict docklands will remain derelict until it is sorted out.
Many of my hon. Friends from Liverpool constituencies wish to speak. We shall not vote against the order. We look at it quizzically but we welcome any money that will flow to Merseyside, which so desperately needs national financing.

Mr. James A. Dunn: I welcome the general intent of the order. I have some reservations, and I wish to ask a number of questions. I am sure that the Minister will not be able to answer them all immediately. I shall be happy to receive a written reply, which I shall circulate to my colleagues and other interested persons.
I have believed for some time that Merseyside needs a development agency of some type. I do not join the hon. Member for Liverpool, Wavertree (Mr. Steen) in his condemnation of precious attempts. The inner city partnership is producing some results. They have taken time to work through. There were difficulties about coordination and co-operation but they have been resolved. The benefits are beginning to accrue.
I share the apprehension of my right hon. Friend the Member for Widnes (Mr. Oakes) about the competing organisations in the 20-mile radius and the setting up of an enterprise zone. They compete for the finances. There is even more apprehension since the Budget.
I wish to ask several questions. I shall try to be as much to the point as possible.
I was grateful to the Minister for allowing me to intervene in his speech. It appears from what he said that under section 134 the Secretary of State has assumed that in land designation the development corporation will be able to take land that he considers to be already in public ownership. No doubt that was based on the fact that the Mersey Docks and Harbour Company owns about 75 per cent. of the land designated on the maps. It owns land on both sides of the river, and going from north to south on the Liverpool and Sefton side of the Mersey. The land goes away from the docklands in the south to what was once oil tanks and an oil jetty at Dingle. It then goes to Otterspool promenade, to land that was once used for open recreation

and is now parkland. Therefore, a number of side issues are associated with what the development is attempting to do.
Although the Government are a major shareholder in the Mersey Docks and Harbour Company they have no more rights than any other stockholder or shareholder. To that degree-I am not being hypocritical or over-critical on this matter—the assumption is based on less than fact. I hope that the Minister will give the matter proper and due consideration.
If the land designation is not generally in public ownership, how will it be brought to the ownership of the new corporation? Will powers be vested in its four compulsory purchase orders? Will the local authorities be asked to act as agents in order to acquire the necessary land? What would be the consequences if that were so? I am considering only the land that belongs to the Mersey Docks and Harbour Company. By an Act, a moratorium and agreements across the Floor of the House there is a designation for what should happen to any moneys realised on the sale of land. We resisted that at the time. That would immediately go to the stockholders. Nothing would accrue to the Mersey Docks and Harbour Company. It could not use that money for extra capital development or for the extension of some of the facilities in the other portion of the docks. It could not even contribute to the investment for anything that might be created as a facility within the land that originally belonged to it. That needs careful thought. I am sure that the Secretary of State will wish to consider that matter more carefully, because it is based on a false assumption.
At first glance, the sale might please the stockholders. Some of them might jump for joy at the thought that all the south docklands will be sold and will think that large sums of money will accrue to them. But how is the valuation of that land to be judged? What are the criteria for the valuation of derelict dockland? This dockland is different from any other.
In the south docklands, the silt from Canning to Herculaneum dock is high in intensity, and is heavily contaminated and polluted. From Queen's dock to Toxteth dock it is a hazard to health. How will the silt be cleared away to stop the hazard to health and the danger to those who work in the area?
If we followed some of the suggestions made by the brilliance of those who turn their minds to it we should leave water there, but with the silt underneath. That would not remove the hazard; it would only increase it. As time goes on it would become worse. That contamination must be dealt with. There will be major difficulty dredging the dock and putting the silt on land, or dumping it at sea. It will take a major operation to do so. I assure the right hon. Gentleman that it will cost much more than £16 million. I speak with some knowlege of dredging and the port.
Even if that difficulty were to be overcome with the resources that were made available, there remains the problem of re-establishing the dock walls and the infill. That will take time and major resources. My estimate, off the top of my head, is that the infill would cost over £250 million. If that is doubted, one has only to take the measurement of what has already happened in Herculaneum dock, with the infill of rubble, and what is happening in the rest of the dock.
A large water mass must be dealt with. When silt and water are taken away the pinion, the toe and the heel of the dock walls become suspect for collapse. Many


problems have yet to be resolved in the designation of the land. I could speak about that point for two or three hours by delving into the technical details. I shall resist that temptation. I shall write to the Minister about some of the other important points.
Having dealt with the allocation of resources and the method by which the redevelopment will take place, I should like to know who will control, organise and finance it. Will it he a partnership between commerce, industry and the corporation? I cannot envisage that. There will be no investment in the land until it is ready for development, which means after the infill has taken place and after having dealt with all the dock buildings that are rapidly deteriorating throughout the dock systems.
I could talk about the Wallasey dock. I could refer to the other side of the Alfred dock, which is in exactly the same position as the Wallasey dock. There are about three or four feet of silt and a larger water mass. It is not contaminated, but is still creates problems. There is little difficulty about the Dingle area, except in terms of knowing what can be done with the sunken tanks that used to contain oil. There is a multiplicity of complexities that must be faced in the designation of that land. Again, I shall write to the Minister about the details.
I turn to the method of appointing members to the board. I join with my right hon. Friend the Member for Widnes in saying that it should be composed of people who come from Merseyside and understand the area. I ask the Minister to think again.
Unlike my right hon. Friend, I am glad that he did not name the 11 members. If he had, he would not be able to agree to my request. I ask him to reconsider the composition of the board. There should be a more equal balance of those nominated from the local authorities—Wirral, Sefton, the Merseyside county council and the Liverpool city council. I ask for six of the 11 places. That would leave him five plus the chairman, the deputy chairman and—I hesitate to say it—the chief executive officer. Most unusually, the chief executive officer has been appointed by the Secretary of State. He hired him. Who is the one that will fire him if he cannot do his job, or if he fails to meet the challenge?
Having dealt with the composition of the board, how can we resolve the problem of the planning authority's relationship with neighbouring authorities that possess the planning power? We already have one authority in Liverpool, and there is the Merseyside county council, of which I have personal knowledge. There are four if Sefton, and Wirral and Wallasey are included. They cannot agree now. If absolute power is given to a corporation that has no need other than to consider the commercial development of the land there will always be conflict.
There have been recommendations about high-rise developments on the River Thames. God knows what will happen on the Mersey after the infill has been carried out and the land is ready for development. I once more ask the Minister to reconsider the composition of the board to give a further balance to the nominations from the local authorities to deal with the conflict of identity and operation between one planning authority and another.
How will the new corporation, under the terms of its constitution, prepare a code of practice? How will it cooperate with the subscribing geographical local authorities? What will be the sharing of the power at the end of the day? How will the powers be exercised? Will the Mersey Docks and Harbour Company be considered

a relevant local authority? Any development that takes place inside the docks, especially the South docks, can affect the flow of the river, with consequential difficulties of shifting masses of sand and sandbank. The navigation of the river is put in jeopardy. The Mersey Docks and Harbour Company will have to consider those matters.
I believe that much more thought has yet to be given to the order. In the short time that has been available I am sorry that we have not been able to go into all the aspects of the order. I am grateful for the opportunity that the Minister has given us. I share with my right hon. Friend appreciation for the detail that the Minister gave. But I know from the heart, with my knowledge and experience, that it will not be that easy. At the end of the day we want to see this succeed and work. If it does not work our. constituents will suffer badly.
There is a crisis of unemployment on Merseyside. We need help. We need something tangible tomorrow, if we can have it. I do not want to see delay but equally I do not want to see such a mess that we shall not be able to raise ourselves out of it. I ask the Minister to think again, for God's sake.

Mr. Anthony Steen: One is always impressed when one hears the hon. Member for Liverpool, Kirkdale (Mr. Dunn) speak with such local knowledge and skill, but the problems that he has outlined merely make one realise that "hope springs eternal". Liverpool has been the victim of more action research, community development, urban deprivation experiments, neighbourhood projects, quality of life studies. comprehensive community programmes and partnerships, with more public money spent, than any other city in Europe. One must realise that the time has come to halt the drift of those social, educational and community experiments and develop a new thrust and a new approach.
The urban development corporation comes at the end of a long line of distinguished and, I regret to say, unsuccessful projects designed to turn about the ailing fortunes of the city. The urban development corporation, we are told, is something different. On the face of it, it may well be. Along with the enterprise zone, it is designed to bring economic recovery to the city. The spotlight has turned from eliminating pockets of deprivation and reorganising local authority expenditure to economic recovery—and so it should be.
The House must welcome the urban development corporation, even though some hon. Members are, correctly, cautiously optimistic and others are cynically optimistic. There have been problems about the exact location and understandable difficulties with the docks and harbour company over the land. But the idea that something should be done about the acres of derelict and vacant land on the waterfront must be correct.
The key to the success will not be the amount of Government money that the Minister can offer. We know that Government intervention has done a lot of harm on Merseyside. It has driven out private enterprise rather effectively. Special development area status accorded to the region has let firms build new businesses on industrial parks not in the inner area but on green field sites on the edges. In fact, that has shifted 100,000 jobs from the inner to the outer area.
The massive demolition programmes of the public authorities demolished 21,500 dwellings between 1966


and 1976 and nearly 500 small firms have been displaced in the past six years. Thus, more public intervention and more public money will not solve the problems of Liverpool. On the contrary, they may make matters worse.
The key to the success of the urban development corporation and the regeneration of Liverpool is the extent and level of private enterprise and private investment that will be attracted. If public funds are to be used merely for the infrastructure development for the land bank, that is a good start, but it is not enough. What incentive will there be to bring firms to the urban development corporation? Will the corporation be simply an inner city industrial park? Does the Minister hope that it will halt the continued development outwards on green field sites? It is a pity that the enterprise zone does not cover the same area as the urban development corporation, for that would provide a double incentive. It would provide land prepared, and ready for development, but there would also be an incentive for private enterprise and new businesses to settle there.
I am sorry, Mr. Deputy Speaker, but there is a tremendous amount of noise in the gallery behind, I wonder whether it could be reduced.

Mr. Deputy Speaker (Mr. Bernard Weatherill): I have been listening very carefully to what the hon. Gentleman has been saying, and I have not heard any noise.

Mr. Steen: I am grateful to you Mr. Deputy Speaker. It was becoming a Tower of Babel, but it probably did not catch your ear from behind.
As I was saying, what we have got is the urban development corporation preparing public land so that it is suitable for development but not offering incentives for those who come there. In another part of the city we have an enterprise zone, which has been declared in the very area in which manufacturing enterprises have failed and where derelict and moribund factories stand as a monument to industrial failure. So the urban development corporation has advantages, in that the infrastructure will be provided from public funds but no tax inducement will be given to the businesses that settle there, whereas the enterprise zone will have no infrastructure grants but will have tax inducements for those that decide to settle and get business done there.
But from where will the work force for the urban development corporation area come? The enterprise zone is outside the inner city and many people live around that enterprise zone on the vast public council estates which were built there after the war. But what about the urban development corporation area in the centre of the city on the waterfront? Twenty-two per cent. of the inner city population left Liverpool between 1966 and 1976. With the present cost of petrol, transport and parking in the inner area, which is now so enormous, will there be an incentive for the work force who live in the outer areas to come back to the inner areas? They will certainly not be able to live there, because most of the homes have been demolished. Whereas in the enterprise zones employers can offer higher wages because they have no rates to pay, in the urban development corporation area the employers will still have to pay the full level of rates. Already businesses

in the inner city have left because of the high level of rates. Why should they return to operate in the area of the urban development corporation?
Surely it is a better idea for our big clearing banks, instead of having their windfall profits taxed, to be encouraged to express some measure of social responsibility in this country by spending some of their profits on this urban revitalisation. The banks have increasingly become the enemies of our cities. The four clearing banks have an antipathy to investing in the older industrial areas. Surely they have made enough money in areas such as Liverpool, and surely some of that money should be reinvested in the area in which they have made the money. The American banks have recognised that it is not charitable but good commercial sense to invest in the older ailing areas.
Without new money and new investments, the urban development corporation will just not realise its full potential. If the Minister is concerned about the level of private enterprise in the urban development corporation, I take it that he will ensure that the 50 or so small, private one-man firms, already clustered in the man-made caves in the South docks are not displaced. They do not want to be moved to advance factories, with all the commercial trappings. They simply want cheap accommodation where they can start an embryo business and pay £5 or £10 a week rent and rates. Will the urban development corporation provide accommodation for that kind of business, and at a price that it can afford? Will the urban development corporation have the money not just to develop land but to help to build on it?
Success in Liverpool has always been amongst the small entrepreneurs. The danger of the urban development corporation is that it will stifle the small business men and drive them further away from the city. Will the urban development corporation of today be the enterprise zone of tomorrow, with abandoned factories cluttering the land, witnessing an era when public money tempted big business to come North, only to abandon the sites when the economic recession hit it?
We do not want the urban development corporation to be another in the very long line of urban initiatives. We hope that it will be something different, but whether it will work and to what extent will depend on the value for money offered to private business, the level of rates the local authority charges, and the attitude of the financial institutions, banks and insurance companies towards lending money and taking real risks.
The present Government partnership is a contradiction in terms, because the partners are all in the public sector. The urban development corporation must be a genuine partnership. That means joint enterprise, joint resources and joint responsibilities. The Government must finally show that they are prepared to trust and work with the private sector as equals fighting the same battle.
Let us give the urban development corporation a chance and let us hope that it succeeds.

Mr. Allan Roberts: When the concept of an urban development corporation was proposed in the Local Government, Land and Planning Bill, it was generally welcomed by those who represent or live in constituencies in Merseyside, whereas the proposals for an urban development corporation in London's Docklands have been greeted with hostility.
Hon. Members representing Merseyside constituencies and others welcomed the proposals because, unlike our London counterparts, we felt that the local authorities involved might not be able to deal with the job adequately. My right hon. Friend the Member for Widnes (Mr. Oakes) paid tribute to the efforts made by local government to revitalise docklands and to deal with the problems involved. However, the situations in Merseyside and London are different. For example, all the local authorities in Merseyside are either Conservative- or Liberal-Conservative-controlled. Over the years, the local authorities do not seem to have shown the drive, initiative and energy of the London local authorities in the revitalisations of docklands.
Together with my hon. Friend the Member for Liverpool, Kirkdale (Mr. Dunn), I am worried that when the board of the Merseyside development corporation is constituted no one will represent the areas that are being designated. Each local authority is nominating a member. The Liverpool, Sefton and Wirral local authorities and the county council will nominate a member. With the exception of Liverpool, which may choose a Liberal, the authorities will choose Conservative representatives. In the end, there will not be any Labour local authority representatives on the Merseyside development corporation. But all the areas concerned and the surrounding areas elect Labour representatives to Parliament and to the local authorities. I hope that the Minister will give that matter serious consideration and rectify the mistake.
The local authorities have often dealt with the problems in an incompetent manner. They have certainly been Scrooge-like in their attitude to providing public services and money for the infrastructure needed to attract industry to the area. I speak with some knowledge, particularly of Sefton council. It is one of the lowest-rated metropolitan districts in the country. It has done very little to meet the needs of the area. Indeed, it admits as much in some of its reports.
The boundaries of the urban development corporation area in the constituency of Bootle cover what is know as the "maritime area" in the plans and proposals of Sefton council. Only last year, in its report on employment in industry, the metropolitan borough of Sefton stated that the development of the maritime area had not been as extensive as had been envisaged. It said that it still contained a mixture of uses and the largest resource of potential industrial land in the plan area that was still unused. That area was going to be developed for uses subsidiary to those of the Mersey Docks and Harbour Company, but that has not happened.
Having welcomed the concept of the Merseyside development corporation, one of the things which leads myself and others now to be a little sceptical is the way in which the Minister has gone about setting it up and the very slender resources that are actually to be allocated for the corporation.
If we compare the £16 million which is being allocated for areas throughout Merseyside with the £19 million which has been knocked off Sefton council's rate support grant alone, we see how little this is, and it seems that this is just a palliative—that a lot of window-dressing is taking place and that no real action will follow.
In an intervention in the Minister's speech I referred to the problems of the Rimrose housing estate, in my constituency, within the area that is being designated. That estate is surrounded by industrial land and other industry.

It is across on the port side of a busy main road. It has no facilities and has been neglected for a considerable number of years. It seems that between them the local authority, the county council and the shadow urban development corporation that has been in existence for some months now have been practising a major exercise in closed government, not telling the residents of the area what their thinking is about the future of that estate.
There are proposals that have been in existence for some time in the Sefton planning department for the demolition of that estate and the rehousing of the people elsewhere because it has always been considered to be in a bad situation and in an area that should be concerned with industrial uses.
Now, with £16 million for the whole of the Merseyside development corporation, I believe—although I am not certain of the figure—that about £6 million will have to be spent on the purchase of land from the Mersey Docks and Harbour Company. In fact, in the Mersey Docks and Harbour Company's document "The Profitability Study, 1980", which the Government required the company to produce, the statement is made under section 353:
This section has been omitted as it deals with specific areas of the company's properties which are the subject of current negotiations with the urban development corporation.
So it is still not very clear exactly what is happening, but rumour has it that £6 million at least of the £16 million is to be spent on purchasing land from the Mersey Docks and Harbour Company. As my hon. Friend the Member for Kirkdale said, that will be distributed to stockholders or shareholders and cannot be spent on capital investment in the docks to create more employment. So that is not going to be any help whatsoever.
That leaves at the most £10 million, and it would take almost that to deal with the Rimrose estate problem itself. So the urban development corporation sees no future for that estate and we would like some kind of intervention from the Minister to make sure that at least the residents of the estate know what their future is. The worst thing for the residents is not knowing whether the estate is to be demolished and they are to be rehoused, or whether it is to remain. Certainly if it is to remain we want to know what kind of life it is to have so that some money can be spent on it, it can be improved, and life can be made tolerable and bearable for those who remain there.
I hope that the Minister will address himself to that question and explain to me and my constituents, who are very concerned about this matter, exactly what powers he has given in this order to the urban development corporation as far as housing is concerned, and whether he has any knowledge of the discussions that are going on between the UDC and Sefton council. In its own report the Sefton metropolitan district council, referring to the Rimrose estate, said:
This matter is currently under consideration by the Department of the Environment and the committee"—
that is, the policy committee or the housing committee of the Sefton council—
will be kept informed of any development.
That report was dated 4 November 1980, so I hope that if it is accurate it will allow the Minister to tell us exactly what the Department of the Environment has been discussing about that estate, so that the people of the area will know at last exactly what is going to happen to them in the future.
One of the problems with the Merseyside development corporation has been highlighted by the hon. Member for


Liverpool, Wavertree (Mr. Steen)—that the enterprise zone is being set up in a green field site. That enterprise zone, I assure the Minister, will not create any more new jobs in Merseyside. During the summer recess, I went round a number of firms, bonded warehouses and other warehousing factories, and all the owners told me that when the enterprise zone was set up they would move from dockland to the zone. Our major expense is rates. We shall not be able to compete with any bonded warehouses set up in the enterprise zone, so we shall move there so that we can compete. Jobs will therefore actually move from the inner city docklands area. Warehousing and bonded warehousing will move to the enterprise zone. That will not assist the development corporation's activities at all.
In addition, particularly in the maritime area designated in my constituency, the jobs envisaged for the future are related to the activities of the port. Most of the jobs that have been created in the past and are developing in that area relate to the activities of the port. The port is in decline. The Government refuse to assist the Mersey Docks and Harbour Company with investment. They will assist it only to buy off jobs and reduce the amount of activity in the docks by paying £16,000 to every docker who leaves. Unless the Government do something to revitalise the docks and to assist the Mersey Docks and Harbour Company far more than is at present proposed the development corporation will have its hands tied and will be unable to develop in the way that the Minister envisaged in his statement.
A further recent development will affect these areas considerably. The Secretary of State for Industry and his ministerial colleagues have altered the way in which grants are given to firms in a development area. A well-known firm of dock chandlers, which has now developed its activities into making equipment for containerisation, has told me that it can no longer obtain grants to expand its activities in Merseyside because the Department of Industry will give grants only for the establishment of new industries and not for the expansion of existing industries. Unless something is done about that there will not be much room for development by the corporation.
I disagree completely with the hon. Member for Wavertree, who asserted that the development corporation will succeed through a partnership with private enterprise and incentives to private enterprise. History has proved that that is the way in which Merseyside has been let down. From 1964 onwards, from the time when the Wilson Government came to power and subsequently through the period of the Heath Government, billions of pounds of public money were poured into Merseyside, not into public enterprise but to encourage private enterprise and private capital to invest in Merseyside. That has not worked.
Indeed, we are now witnessing a reversal of the situation, in which private capital is leaving Merseyside. Private firms are closing down and there is less and less private sector investment. One has only to consider the list of firms that have closed down—Tate and Lyle, Courtaulds, Bowaters, and small companies as well. Companies that had Government assistance to establish themselves in Merseyside are now getting out. So the idea that private enterprise will solve our problems is hardly a convincing one.
We hoped that the development corporation would bring a big injection of public money, public expenditure and public activities in the docklands to set Merseyside on the right course. We hoped that it would be able to create jobs and activity, to save the docks, to create a new environment, to create new jobs and to create wealth by public enterprise. With £16 million and further cuts in public expenditure promised by the Treasury, I do not believe that the future is as rosy as all that. Nevertheless, I hope that the Merseyside development corporation will work, because it is a concept that I welcomed in the beginning and still welcome as a concept.

Mr. Deputy Speaker: Order. I understand that the Minister would like to begin to answer the debate at about 11.20 pm. I should like to be able to call the three hon. Members who have risen in their places.

Mr. Eric S. Heller: I shall be about three minutes, Mr. Deputy Speaker. When the Labour Government discussed urban development I suggested that there should be an urban development corporation in Liverpool. I therefore naturally welcomed this development. I believed then that we ought to have a body that could cut through red tape and speedily get down to tackling the problems, particularly those of the South docks.
I worked on the South docks for many years, as did my hon. Friend the Member for Liverpool, Kirkdale (Mr. Dunn). Anyone who knows those docks knows that the area is not quite the same as the rest of Merseyside. It is a special area, which needs special treatment.
If I have any criticisms, it is that the money being made available to the corporation is insufficient. It would be wrong if once the corporation has got off the ground and begins to deal with the problems—as I think it will—it finds that it has run out of money because private investment is not forthcoming.
While public money is to be used as a catalyst for private investment, the danger is that we shall not get that investment. Therefore, it would be wrong if the corporation were starved of the necessary money.
The corporation's first statement talked about revitalising the heart of Liverpool. That is essential. I hope that there will be new housing in the area, as part of all the other work. It must be mixed housing. Do not let us have any more ghettos of one kind or the other. We must not miss this opportunity. I should like to see a Liverpool "Pimlico", where rich and poor live cheek by jowl. I want to see that sort of development. I want to see many other developments in that area.
There is a problem about small existing companies. However, had the hon. Member for Liverpool, Wavertree (Mr. Steen) read the document issued by the corporation he would know that it proposes to cater precisely for those companies. It does not intend to do what happened in the Islington area of Liverpool, where the small businesses were wiped out.
I welcome this corporation. I know that many local councillors got uptight about it. Sir. Kenneth Thompson is an old friend of mine. He is also an antagonist, in the sense that we fought each other at the hustings. Luckily, I won. He was very much against this idea. Many councillors have changed their minds. Some were for it


originally and are now against it. Others were against it but are now in favour of it. Sir Kenneth was against it until he was made deputy chairman, and then he was for it.
I welcome the corporation. It is essential. There has been far too much negative talk this evening. I do not like that. The corporation is something that Merseyside should welcome. Whatever we may feel about the composition of the board and whether it should have more elected representatives— I believe that it should— we should acknowledge that this is a welcome development. However, I ask the Government to make more money available in order to make it a success.

Mr. Richard Crawshaw: The largest of the three designated areas covers the waterfront of my constituency. Twenty-five years ago it was a hive of industry. Some of my hon. Friends worked in the area. Now I doubt whether more than two or three dozen people are employed along the whole length of those docks.
I was heartened by what the hon. Member for Liverpool, Walton (Mr. Heffer) said. It brought a note of realism into the debate. We should not be pessimistic about what can happen in Liverpool. I like to believe that the Government intend to make a go of this. The only thing that can stop it getting oft the ground is too many people looking to their own empires. A development corporation is the only body that can concentrate sufficiently on the problems of a small area to make the plans work. I hope that the Liverpool corporation and other authorities involved will work towards that end.
The hon. Member for Wavertree asks where the workers will come from. My constituency, within a stone's throw of the development in the South docks, can provide 5,000 or 10,000 people who are out of work.
I am sad about the amount of money allocated, although we hear that there may be more. I take that in good faith. I hope that the Government will not let down the people of Merseyside. They have been let down often after their hopes have been raised. Past promises have been made in good faith, but have not helped the people of Merseyside. I hope that the Government will make every effort to make the development corporation work.
I have had a bee in my bonnet ever since the development of the docks was first mentioned. In the centre of Liverpool we have wonderful docks, with probably one of the best landing stages in the country. Two miles further up the river is Otterspool, with a wonderful frontage and green lawns. In between, we have devastation. The development between the two areas will settle the fate of Liverpool for the next 100 or 150 years. It will be a crime if we do not make the whole stretch as attractive as it is at Otterspool. We can have a mixture of housing and industry, but I should like the front at Liverpool joined up with Otterspool, with a promenade on which the people of Liverpool and Toxteth can take daily walks.
I welcome the proposal, and wish it every success.

Mr. Eric Ogden: Like the speeches of the hon. Member for Liverpool, Toxteth (Mr. Crawshaw) and my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), my speech will be a truncated version of what was intended to be a brilliant and

devastating resume of the development corporation and all that it may or may not be. The Minister will be able to speak well before 11.20 pm.
My approach to the development corporation is rather like the approach of the man from Missouri—prove it; show me. It is partly that of the optimistic pessimism of the hon. Member for Liverpool, Wavertree (Mr. Steen)—although I deplore his attacks on the banks. It is not my role, from the Labour Benches, to defend the banking system, but from my personal knowledge of the regional directors of more than one bank on Merseyside I can say that the banks are pouring a great deal of money from their coffers into Merseyside. The case for not having a levy on banks is made on Merseyside. They are not calling in overdrafts, and are supporting small companies.
The development corporation approach is not what we asked the Labour Government for; we wanted a Merseyside development agency. We do not all trust every local corporation or city council. The officers are different. The debt owed to the city of Liverpool's senior officers and chief executives should be placed on record, but now is not the time. We do not particularly trust city councillors as representatives. I would not put some in charge of a fish and chip shop, let alone give them seats on the board of the development corporation.
Nevertheless, the task of the development corporation should have the support of every hon. Member representing Merseyside and every outside representative. It has a good chairman-designate, who has considerable contacts outside Merseyside—the old fox whom my hon. Friend the Member for Walton once defeated but who has never held a grudge—Sir Kenneth Thompson. He has political contacts and a great deal of expertise. He has a good potential team. I wish that we had had more advertising for staff locally, but that is a small point. Will the corporation need 52 members of staff? Will it try to recruit them locally? Merseyside and its need have a special quality, which would take an incomer time to understand.
If £16 ½ million is to be provided and if most of the land is in the control of the Mersey Docks and Harbour Company, there is at this stage no incentive for the company to dispose permanently of any land. None of the revenue from the sale of the land would come to the company in the form of everyday working capital; it would go to the bondholders. The right hon. Gentleman should be talking to the Secretary of State for Transport to see whether arrangements can be made to deal with the settlement imposed by the previous Conservative Administration, who permitted a policy of non-intervention, so enabling the company to dispose of some land profitably.
Will the Minister encourage the development corporation to look at commercial and service industries? That is the hope of Merseyside. Will he wish the corporation well in its efforts? Is he trying to tell hon. Members that if we make sufficient fuss we shall get more money? If that is offered tonight, it will save a great deal of time.

Mr. King: With the leave of the House, I should like to reply to a number of points that have been raised. I should like to express my gratitude for what I thought was the much more positive response in the latter part of the


debate to the proposal that I have put before the House. I should like to deal with a number of detailed points. On those that I do not cover, I shall write to hon. Members.
The right hon. Member for Widnes (Mr. Oakes) raised the question of a relative share of resources. If one takes the acreage involved in the Docklands UDC and that involved in the Merseyside UDC, one sees that Merseyside gets a rather larger share of the provision proposed at present. That is not, however, a particularly valid observation and I shall say more about resources at the end of my remarks. The right hon. Gentleman argued that the proposal was not like a proposal for a new town, and drew attention to the fact that odd pieces are selected. This is the nature of the problem. It is a different exercise. It seeks to take the new town approach into an old town. One does not get the perfect green field development. There is the problem of dealing with different bits that have decayed more rapidly than others.
A number of hon. Members raised the question of membership of the UDC. I hope that we shall be able to take account of local representation. It would be a pointless exercise to seek to appoint people from miles away who commanded no local confidence. The hon. Member for Liverpool, West Derby (Mr. Ogden) was kind enough to pay tribute to our choice of chairman, while the hon. Member for Liverpool, Walton (Mr. Heffer) referred in affectionate, if conquering, terms to the deputy chairman. We believe that this is a sensible approach.

Mr. Heffer: I said that I was lucky.

Mr. King: I accept that. We shall seek to ensure that the board is strong and respected. In regard to staff, it is important to get the skills and experience needed for certain specialist jobs. Otherwise, so far as possible, local staff will be appointed.
The right hon. Member for Widnes asked me one of those worrying technical questions, which for a moment caused me apprehension until I thought about it, relating to CPOs and whether any individual CPO would be hybrid. In my judgment, the answer is "No". I am fortified in making that response by advice from the official box that suggests that I am correct. That makes two against one, which may be a winning combination.
The hon. Member for Walton, referred to the need for what he called a "Liverpool Pimlico"—an evocative phrase. I am sure that the approach to mixed housing is right. The need to avoid a concentration of one form of development is important. The hon. Member for Liverpool, Kirkdale (Mr. Dunn) referred to the position of the Mersey Docks and Harbour Company. It is a statutory company, but for the purpose of vesting it is in the public sector. The hon. Member for West Derby suggested that we should talk to the Secretary of State for Transport. Talks with my right hon. Friend have already taken place. The talks are proceeding well with the company. It has responsibilities to its stockholders.

Mr. Ogden: rose—

Mr. King: I shall not give way. I ask the hon. Gentleman to write me. There are a number of questions to which I must respond before the debate is closed.
We are optimistic that it will be possible to make satisfactory arrangements with the company, which is co-operating well in the initial discussions with the shadow members of the corporation. The members of the MDHC recognise that it is crucial that adequate land be obtained if the development corporation is to proceed.
There are problems with valuation. The relevant provisions are set out in the Act and the issue will be dealt with under the compensation code in the Act. That is the responsibility of the district valuer.
My hon. Friend the Member for Liverpool, Wavertree (Mr. Steen) suggested that we should have enterprise zones coterminous with the UDC. The point of the exercise is to try two different approaches. My hon. Friend rightly contrasted the difference between one and the other. I am pleased to be able to say that both approaches will be tried in the area.
With respect to my hon. Friend, I am much more in sympathy with the hon. Member for Liverpool, Toxteth (Mr. Crawshaw) on the issue of finding the work force. The least of the problems in Liverpool at present is the location of the work force. I feel that it will be readily available. We shall seek to give every encouragement to the tenants in the sites that now exist.
I cannot add to what I have already said to the hon. Member for Bootle (Mr. Roberts) about the estate in respect of which he expressed concern. The development corporation is conscious of the problem and we shall do what we can. The corporation will be anxious to ensure that the estate is not disadvantaged. It has been a problem for the Sefton council and I am aware of the difficulties to which the hon. Gentleman referred. These are problems that will have to be considered.
I do not share the hon. Gentleman's pessimism about the enterprise zones. He claims that there will be no new jobs, but merely immediate transfers. I had to face that criticism when I piloted the Bill through the House. There is some risk that there will be a transfer of jobs, but I contend that the enterprise zones will stimulate new jobs. I was pleased last week to issue the official invitation to Sir Trevor Jones, the leader of the Liverpool city council, for the enterprise zone scheme to be set up.
A number of hon. Members referred to £16 million as if it were a lump sum contribution. In fact, it is only the sum for this year. A further contribution will follow in subsequent years.

Mr. Ogden: If it is used.

Mr. King: During my contribution and other contributions I was aware of certain elements of the volcano about the hon. Member for Walton. I was encouraged by his remarks. It is easy to indulge in too much negative talk. Of course, there are problems. I offer the House no guarantee that the corporation will work. A long series of initiatives, including regional policies and industrial incentives, have failed for different reasons. The hon. Gentleman is not alone in suggesting that we need the single-minded approach of a development corporation to tackle some of the most intractable problems that we face.
My hon. Friend the Member for Wavertree has been staunch in his support for the private sector. We believe, as the hon. Member for Toxteth said, that Liverpool and Merseyside can rise again.

Question put and agreed to.

Resolved,


That the Merseyside Development Corporation (Area and Constitution) Order 1980 a copy of which was laid before this House on 27 November be approved.

Orders of the Day — WELSH GRAND COMMITTEE

Ordered,
That during the proceedings on the matter of the Consequences of the Budget and the Government's Economic Policies in Wales, the Welsh Grand Committee have leave to sit twice on the first day on which they shall meet; and that, notwithstanding the provisions of Standing Order No. 64 (Meetings of Standing Committees), the second such sitting shall not commence before Four o'clock nor continue after the Committee have considered the matter for two hours at that sitting.—[Mr. Newton.]

Orders of the Day — Vale of White Horse District Council

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Newton.]

Mr. Tom Benyon: I am fortunate in having in my constituency two districts councils—both Conservative-controlled, disciplined and responsive. They are both dedicated to keeping down rates and costs in their area and to maintaining services to their ratepayers. The first is the South Oxfordshire district council, which is responsible for the southern part of my constituency, and the second is the Vale of the White Horse district council, based in Abingdon.
Neither of those councils is an over-spender. Both have shown a determination to run their areas responsibly and in the best traditions of local government. Both have set examples of financial continence and prudence that I hope will be noted by the voters at the next local government elections in May. The councillors in both districts have been tolerant of the problems that appear, as far as they can see, to have emanated from Government in recent months. Both councils have, to my certain knowledge, attempted to understand the new block grant system. Neither met the change in local government financing 'with closed minds.
Senior councillors in the Vale of the White Horse district council were grateful for the opportunity to meet a Minister at the Department earlier this year who explained to them the intricacies of the block grant. However, I have to tell my hon. Friend the Under-Secretary that these councillors were not entirely satisfied with the answers given. Nor did they fully understand the block grant. This is one of the reasons why I have raised this debate.
I fully appreciate, as do my constituency councillors, that the Government have the highest aspirations in making the change from the old system to the present block grant. I believe that the Government's intentions were to achieve the following commendable aims. First, they sought to increase incentives where few existed previously by tapering off Government support for local government spending once a certain limit was passed. Secondly, they sought to provide greater scope for local decision-making by allowing almost total freedom, on the capital side, in any event, in reaching decisions on how to spend the more tightly constrained total of funds. Since council current spending covers the provision of services that are a statutory obligation, the scope for freedom is necessarily limited.
The third aim of the Government was to achieve simplicity. I am sure that one of their aims was to have a system that was understandable. The Secretary of State has often said—I agree with him—that the old system was incomprehensible and that a simpler system was needed—one that could be achieved by measuring local needs on a declared basis and publishing the sums so provided. At least when one understands the principles one can argue the quantum, presumably on a rational basis.
In a perfect world this system should work. The old system was obscure, expensive and inefficient. However, I have yet to be convinced—this applies to my constituency councillors and many others; not only those


who always see problems for every solution produced by the Government but genuine Government supporters—that the new system will be an improvement on the old one.
Thoughtful observers of the new system fear that it is every bit as obscure, inefficient and possibly as expensive as the old system. It will give me genuine pleasure and relief to be persuaded to the contrary by the Under-Secretary. I hope that the proof of the pudding will be seen to be in the eating, when, in a year's time, my hon. Friend will be able to announce what saving has been made as a result of the implementation of the new block grant system.
However, it is possible that the old system is being dumped before the new system has been entirely thought through. To date my constituents are not convinced that the rough justice that has been meted out is not unnecessarily rough. They feel that there is not enough justice in the system for them. They believe that the new block grant system may have the opposite effect to what was intended. Far from being clear, the new system appears to be rather arbitrary in its application. With the measurement of needs being applied through some form of algebra, the result is somewhat obscure.
The Vale of White Horse district council has attempted to work out the variations between what has happened to it and to local authorities bordering it, both Oxford city and the South Oxford district council. I shall not weary the Minister with the detailed workings of the calculation. Suffice it to say that the grant appears to allow £18·64 more per head of ratepayer in the area of Oxford city and £1·24 more in the area of South Oxford district council than ratepayers in the Vale of White Horse district council will receive, and I have to say to the Minister that no one can quite see why these things should be.
Secondly, and partly to allow for known imperfections, individual grants are not fixed but are still partly related to expenditure, and yet the total of all grants is fixed by cash limits. This might be an open provocation to over-budgeting, since authorities expect to get only a proportion of their entitlement. That, I think is human nature. I see, with a degree of alarm, that I asked my right hon. Friend the Secretary of State how many local authorities had budgeted for expenditure in the current year in excess of the targets laid down by his Department. I received the reply yesterday that, on the basis of local authority 1980–81 revised budgets, 249 authorities in England had budgeted for current expenditure in excess of their volume targets for 1980–81 by a total of £317 million at November 1979 prices. I regard that answer as rather alarming in the circumstances. It appears to justify the doubts that I have about the inflationary element in the way that the block grant is calculated.
I have to say to my hon. Friend that my council is keen to help in the battle against rising public expenditure. Today it is facing a reduction of over £¾ million in its rate support grant, which is equivalent to an increase of 4·4p in the pound. This is coupled with the extra costs involved in the full cost of rate collection, which will be added to the district rate next year. Faced with the prospect of an increase of over 7p in the rate for district purposes, the future for the electors in my constituency appears to be bleak. As, I repeat, the council has a record of sound budgetary control that Whitehall should envy, it is having

great difficulty in finding where to cut. The savings that are contemplated will cut into the bone because there is no fat left.
The senior councillors know the trap of just cutting capital expenditure. It is so much easier to do that in a democracy. It is the revenue expenditure that always hurts the most. The councillors know that cutting capital expenditure leads to problems if the administration is merely allowed to march on—a lesson that Whitehall might take to heart as well.
The councillors are reluctant to cut services, because they take considerable pride in running them, as they have for many years, most efficiently. However, the council has been forced to cut recreational facilities at the old gaol in Abingdon, to the great distress of my constituents and, indeed, the council.
I must tell my hon. Friend that 12 people have recently been made redundant. The councillors and senior officers are also looking at other areas of the administration to make savings. They know that no-redundancy policies are Socialist luxuries, which the corporate ratepayers and ordinary ratepayers cannot contemplate or afford. They have been making savings and taking proper steps so that the rates will not have to rise unduly, although there will be a considerable hoist in the rates this year.
Most of the problems are faced by other councils in the country. We cannot claim a monopoly of problems as a result of the rate support grant. However, a specific problem is faced by the Vale of White Horse district council, which believes that it has been penalised over the rate support grant calculation for selling its housing stock to tenants.
The problem arises when calculating the authority's assessment for grant based on how much it should spend. The arithmetic dealing with profits and deficits and housing revenue account assumes that future interest and mortgage payments resulting from council house sales will put the district council into substantial profit. That income counts as a contribution to the rate fund, depresses the Government's grant-related expenditure assessment for the council, and leaves it with a smaller grant entitlement than it would have received if it had not sold any council houses.
There is a further problem involved in council house rents. The calculation assumes that councils will charge the average rent for the region. Councils charging below the regional average have a lower assessment and lower grant. They will have to make up the difference by increasing rents or rates and cutting services even further.
My constituent councillors are concerned that they are being penalised by having to charge higher rents to ensure that expenditure assessment and grant entitlement is higher in 1982–83. If that is the national tendency it could be inflationary. Councils with high rents and high levels of expenditure do not appear to be penalised in the same way under the formula.
I cite Lambeth—and who does not cite Lambeth when talking about incontinent councils? Lambeth makes a speciality of spending money, ignores Government requests for rent rises, and does not make haste in selling council houses—quite the reverse—and does well. In this aspect of grant allocation my council is being penalised because of low expenditure and low rents.
I do not wish to sound negative. My Conservative councillors and I are at one in wishing the Government success in their attempts to introduce controls and to save


on public authority expenditure, but we remain unconvinced that the present system is working in the interests of my constituents or, indeed, of the country at large.
I hope that the Minister can give my authority some comfort. Surely we cannot sit idly by and see our facilities reduced and our rents and rates rise whilst other authorities who ignore calls for cutting costs benefit at the expense of the public purse.
I respectfully seek from the Minister the replacing of about £286,000, which has been lopped off our housing revenue account in the erroneous belief that on sales of council houses the Vale of White Horse district council is cash in. Mortgages are supplied by the council and it is not in receipt of substantial sums. It has merely transferred cash from one ledger to another. It is wrong to believe that the council has benefited substantially in the short term. We freely concede that what has been done has been done. We hope that it will be reviewed in years to come. We also hope that the Minister will review the grant after the first year.
My constituent councillors know that there is an element of rough justice. They are not seeking Utopia, or grumbling irresponsibly about cuts. They intend to serve, but they do not believe that Westminster has got it right at the start. They believe, with some justice, that the problems of local government are not always understood at Westminster. Sometimes councillors feel patronised by Departments that do not appear fully to understand the problems of councillors or the efficient way in which they run their local authorities. That could be reflected in the way in which Westminster Departments are run.
I cordially invite the Minister to Abingdon to see for himself the unique contribution that my council has made to planning, and how ancient Abingdon lives happily with modern housing, which blends with discreetly placed industrial estates for medium and small business. The whole is a pleasure to the eye and a tribute and compliment to the authorities that have grappled with many problems of late, not least with the closure of MG in Abingdon, which now entails a new beginning for an industrial estate to be developed by Standard Life, which we hope will replace the jobs lost last year. All those problems have been faced manfully by my district council.
I end on a high note. If the Minister comes to my constituency—as I hope he will—he might take time to pay tribute to the Edwards twins, who have served the local authority well for the past 30 years and who will honourably retire in May this year. I am sure that he will want to wish them well.
On behalf of my council, I shall listen to the Minister's reply with great interest. He will know that although we are critical we offer constructive criticism and hope that the Minister can offer us what we want and what has been expected by my council—an open and constructive mind.

The Under-Secretary of State for the Environment (Mr. Giles Shaw): I congratulate my hon. Friend the Member for Abingdon (Mr. Benyon) on the way in which he put over his case about his council and on the way in which he marshalled his arguments, which suggest that under the present new system of determining the rate support grant his council has been to some extent unfairly treated.
I wish to be associated with the good wishes to the Edwards twins after their extremely long record of public service. I also wish to be associated with congratulating the council of Vale of White Horse on the efforts that it has made to establish the industrial estate to take over from the recently closed Abingdon works. I am delighted to know that there is now a significant prospect of a development there.
The burden of my hon. Friend's remarks understandably related to the block grant. He graphically illustrated many of the exceedingly difficult elements in that system. Those elements illustrate the dilemmas which face any Government when they distribute the rate support grant each year. The task is to share out about £11 billion between over 400 local authorities. That is half the total yield of income tax. Every authority is different. I venture to suggest that my hon. Friend would expect many of our hon. Friends to argue that their authorities deserve special consideration in terms of the way in which the amount should be shared. Each one has its own competing claims on a greater share of grant. The vast majority can point to a long and creditable tradition of responsible decision making and responsible financial control. The Vale of White Horse is one of those authorities.
My right hon. Friend the Member for Bridgwater (Mr. King) was pleased to meet the leaders of that authority last January, together with my hon. Friend. Although they enjoyed their meeting and found it useful, perhaps they did not entirely understand the problem, but at least they had an opportunity for a full and frank discussion about it. One of the major steps forward is that we can have such a discussion at all. That could not have happened under the old arrangements. Therefore, if I commiserate with my hon. Friend's councillors over the fact that they were not totally satisfied, at least the door is open for discussion on those matters.
No longer are the calculations hidden from view. On the contrary, we have opened up both the figures and the thinking behind them to a greater extent than ever before.
I can fully understand my hon. Friend's concern about the not inconsiderable grant changes that the council is experiencing, despite its good record of economy and observance of Government spending guidelines. But that does not mean that the block grant system is failing to achieve its objectives. Nor, indeed, would it be true to say that we are muddying waters which have remained undisturbed for years. Only two years ago, in 1979–80, the then Secretary of State decided to reallocate to shire district councils part of the needs element of the rate support grant, which had previously been paid only to county councils in shire areas. The effect of that was to give district authorities, in one fell swoop, more than £300 million in grant, enabling many of them to achieve very low rate increases that year, or even to cut their rates, because of this windfall. The Vale of White Horse obtained almost £1 million in this way, and cut its local rate by one-third in that year.
How was that money shared out among the shire districts? It was shared out not by using any proper assessment or consistent measure of spending need for districts across the county but by means of a rough and ready arrangement under which three-quarters was based on population and one-quarter was related to their average expenditure over the previous three years. Not only 'was that extraordinarily cumbersome and indefensible as a means of compensating for spending needs; a significant


part of the grant distribution was dependent upon what authorities actually spent. Even the right hon. Member for Stepney and Poplar (Mr. Shore) recognised that that approach could not last and had to be replaced by a better basis for the longer term. We were faced with dismantling those arrangements and bringing district councils fully into the rate support grant on a sound basis. Of course, correcting the anomalies created by the ad hoc arrangements inevitably means some extra difficulty for some authorities this year. But changes now for districts like the Vale of White Horse must be seen in the context of its sudden windfall grant gain of only two years ago.
I turn to the assessment of spending needs—the grant-related expenditures. Of course, for shire districts housing is a key component of their spending and is represented in the GREs by indicator E7. My hon. Friend criticised the way in which we have put this factor together. I accept that the technicalities are difficult to follow and I hope that he will accept, for his part, that the underlying reasoning takes account of the position in which authorities now find themselves.
The indicator is built up on the assumption that each authority is able to charge the regional average rent, so that in some cases—as for the Vale of White Horse—they are assumed to make a contribution to, rather than from, their rate fund. It is the case that Vale of White Horse rent levels are relatively low, and beneath the regional average.
Different reasons may apply in different areas to explain why rents have been kept low. The position can be affected by the age of the stock and the costs which the authority has to bear as a result. Local expenditure on upkeep may be relevant. So too, of course, is the effectiveness or otherwise of local management. But I note what my hon. Friend said about the Vale of White Horse. I would not wish to dispute that its management of its housing stock has been economical and that that has contributed to low rents. I note also what my hon. Friend said about the sale of council houses and the assumptions made that that would allow the authority to retain significant sums. The question of the mortgage payment is involved. There is an arrangement about mortgages which is relevant to this point. The mortgage payment is 100 per cent., and is spread over a considerable time. It is not deductible at once from the amount available for housing. Local authorities now have an enlarged discretion on rent, as is implicitly recognised in basing our housing GRE calculation on the assumption of each authority charging, and being able to charge, rent at the regional average level.
The housing component of the GRE notwithstanding, I gather that the Vale of White Horse is planning to restrain its overall spending in 1981–82 to below the level of its total GRE. That appears to be a matter for congratulation. I am in no doubt that authorities that are able to do that will be in a much better position when we come to next year's settlement. We shall be able to smile on responsible authorities and to frown on irresponsible ones, such as Lambeth.
Naturally, I can give no guarantees about how the rate support grant for the following year, 1982–83, will come out. There are a number of aspects of this year's block

grant which we shall want to examine further with the local authority associations in the Consultative Council on Local Government Finance during the course of this year. It is appropriate, therefore, to tell my hon. Friend quite clearly that the sort of points that he raised tonight in relation to the apparent feeling of unfairness and discrimination in the operation of the system will be matters reflected not only by my right hon. Friend in respect of his district council but by other hon. Members on both sides of the House in respect to many other councils. Therefore, we intend further to investigate the scheme with the local authority associations. No doubt many of the matters connected with factor E7 and housing matters will be concerned. We shall enormously value the comments that my hon. Friend and other hon. Members make on these matters.
There is an important point. The new-found ability of hon. Members to contribute to the wide-ranging debate about the development of the rate support grant is important. It allows us to try to evolve a system to eliminate some of the problems which must have occurred as we applied the system initially this year.
I assure my hon. Friend that while these matters may not in one year either all be explicable or all be put in hand without difficulty, the prospect for the future is that we shall be able to review the operation of the new system and, we hope, make changes in the light of experience.
As my right hon. Friend the Minister told my hon. Friend and his colleagues in January, and as he has made clear in this House on more than one occasion, we are under no illusion that this year's RSG settlement is anything but a tough one. We know that it is a tough one. We are asking a good deal from local authorities—particularly Conservative councils like the Vale of White Horse, which has always readily responded in the past to Government calls for economy. It is essential that every entity charged with responsibility for spending public money at this time should examine its plans afresh to see whether they can be afforded. One corollary of this is less money for local government as a whole out of the Exchequer's resources. But I am confident that we have taken a considerable step forward towards greater fairness in the distribution of those limited funds.
I note what my hon. Friend says about the comparisons between the Vale of White Horse and its adjacent authority, Oxford city. I should like to examine that and write to my hon. Friend on it, offering comments upon it. But overall the system that we have implemented this year is based upon an essential fairness, which was absent from a system which largely depended upon previous rates of expenditure. I urge councillors in my hon. Friend's area and elsewhere to stick to the task of ensuring efficiency and economy. Those are the authorities which will reap the benefits of the greater fairness of the new grant distribution system in years to come.
I am confident that the councillors of the Vale of White Horse and my hon. Friend's authority will be those to whom we shall look for leadership in this matter, because I feel certain that they will be able to operate as efficiently in the future as they have in the past.

Question put and agreed to.

Adjourned accordingly at two minutes to Twelve o' clock.